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Essential facilities for telecom and data transmission

Lindskog, Magnus (1999)
Department of Law
Abstract
Over the last couple of decades, the importance of transmission capacity for telecommunications has grown. Enough upgraded, it can be used for both telephony, data transmission, cable TV, provision of movies, and a number of other services. For the provision of all these services, it is absolutely essential to have access to a transmission medium. The existing networks are often built up protected by a legal or de facto monopoly and have only recently been opened for competition. But the former monopolists can maintain a dominant position using their control of these networks. A well-known concept in competition law is the doctrine about ''essential facilities''. An essential facility is a facility, equipment or infrastructure which is... (More)
Over the last couple of decades, the importance of transmission capacity for telecommunications has grown. Enough upgraded, it can be used for both telephony, data transmission, cable TV, provision of movies, and a number of other services. For the provision of all these services, it is absolutely essential to have access to a transmission medium. The existing networks are often built up protected by a legal or de facto monopoly and have only recently been opened for competition. But the former monopolists can maintain a dominant position using their control of these networks. A well-known concept in competition law is the doctrine about ''essential facilities''. An essential facility is a facility, equipment or infrastructure which is controlled by a dominant undertaking and is absolutely necessary for competitors for being able to provide their services. The origin of the doctrine is found in the US, and one of the most quoted tests for an essential facility is given in the American case MCI v. AT&amp&semicT from 1983. According to the court, four elements must be established for applying the doctrine: 1. the essential facility is controlled by a monopolist&semic 2. the essential facility can not practically or reasonably be duplicated by the competitor&semic 3. the competitor is denied to use the facility&semic and 4. the owner could have provided access to the facility. In EC law, there have been a number of cases regarding inter alia harbours and programme listings necessary for the publishing of a TV guide. In two European cases from 1998, European Night Services (CFI) and Bronner (ECJ), the courts did not apply the doctrine since they did not find the facilities unduplicable. In the latter case, the Court found that there were alternatives, ''even though they may be less advantageous''. In both US and the EC, telecommunications laws have been developed towards competition and deregulation. The backgrounds are however different&semic in the US, AT&amp&semicT had a regulated private monopoly, while the European telecom sector was characterized by public monopolies, often with both regulatory and service functions. The breakthrough for competition in the US was the division of AT&amp&semicT after an agreement in an antitrust case in 1982. AT&amp&semicT's local exchange carriers (BOCs), were separated from AT&amp&semicT and were prohibited from providing long-distance services. To promote competition in the local services as well, the Telecommunications Act of 1996 requires local exchange carriers to inter alia afford access to some parts of their networks to competitors. If the local exchange carrier is an ''incumbent local exchange carrier'', it also has to negotiate in good faith with those carriers which want interconnection, provide interconnection ''at any technically feasible point'', and provide non-discriminatory access to network elements on an unbundled basis. In a number of directives from the middle of the 1980s up to the present, the EC member states have been required to abolish all special or exclusive rights in the telecom sector. In almost all member states, full competition was introduced in 1998. Since the enactment of the Telecommunications Act in 1993, Sweden has been further on the road towards an open market compared to most European countries. This lead seems now to have been obliterated. There are two main opportunities to get transmission access&semic interconnection and by constructing a network of leased or owned lines. Interconnection means the physical and logical linking of networks which makes it possible to communicate with subscribers of another network. Under European law, telecommunications organizations have a right and an obligation to interconnect with each other. When constructing a network, the bottleneck is the local access network. There are a number of more or less advantageous alternatives to the traditional telecommunications network, the most suitable one is probably the cable TV network. In a directive from 1999, the Commission requires that cable TV networks and telecommunications network owned by a single operator are separate legal entities. The other main alternative for a competitive service provider is to lease the connections from the local switch to the customer and thus take over that customer. In September 1999, the Post and Telecom Agency handed over a proposal for new legislation in Sweden which would require Telia AB to lease out these local connections to rates based on costs. The Commission has in a notice clarified how it intends to apply the competition rules in the telecom sector. It considers that the concept of essential facilities will be of relevance, and notes that alternative networks like cable TV networks are not satisfactory alternatives yet. When establishing that an undertaking has a dominant position, the relevant market must be defined. With a very narrow market definition, ''provision of services to Mr X'', smaller network operators would also be required to give access to their networks. For the customer, there are reasons for that market definition. He could otherwise only subscribe to the network connected to his house. The Commission's statement that cable TV networks are not satisfactory alternatives yet is not in accordance with the Court's ruling in Bronner. Cable TV networks are already used for telephony services, They may be less advantageous for the competitor, but so were Bronner's alternatives as well. It is in the interest of the whole society that transmission capacity is constructed. It is therefore important that the legislation regarding the use of connections promote investments in new such infrastructure. It is necessary with special rules giving access to the former monopolists' networks on rates based on costs to promote competition, but in the long run it must be possible to make a profit on investments in transmission capacity. Otherwise it will not be built. (Less)
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author
Lindskog, Magnus
supervisor
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
Konkurrensrätt
language
English
id
1559730
date added to LUP
2010-03-08 15:55:24
date last changed
2010-03-08 15:55:24
@misc{1559730,
  abstract     = {Over the last couple of decades, the importance of transmission capacity for telecommunications has grown. Enough upgraded, it can be used for both telephony, data transmission, cable TV, provision of movies, and a number of other services. For the provision of all these services, it is absolutely essential to have access to a transmission medium. The existing networks are often built up protected by a legal or de facto monopoly and have only recently been opened for competition. But the former monopolists can maintain a dominant position using their control of these networks. A well-known concept in competition law is the doctrine about ''essential facilities''. An essential facility is a facility, equipment or infrastructure which is controlled by a dominant undertaking and is absolutely necessary for competitors for being able to provide their services. The origin of the doctrine is found in the US, and one of the most quoted tests for an essential facility is given in the American case MCI v. AT&amp&semicT from 1983. According to the court, four elements must be established for applying the doctrine: 1. the essential facility is controlled by a monopolist&semic 2. the essential facility can not practically or reasonably be duplicated by the competitor&semic 3. the competitor is denied to use the facility&semic and 4. the owner could have provided access to the facility. In EC law, there have been a number of cases regarding inter alia harbours and programme listings necessary for the publishing of a TV guide. In two European cases from 1998, European Night Services (CFI) and Bronner (ECJ), the courts did not apply the doctrine since they did not find the facilities unduplicable. In the latter case, the Court found that there were alternatives, ''even though they may be less advantageous''. In both US and the EC, telecommunications laws have been developed towards competition and deregulation. The backgrounds are however different&semic in the US, AT&amp&semicT had a regulated private monopoly, while the European telecom sector was characterized by public monopolies, often with both regulatory and service functions. The breakthrough for competition in the US was the division of AT&amp&semicT after an agreement in an antitrust case in 1982. AT&amp&semicT's local exchange carriers (BOCs), were separated from AT&amp&semicT and were prohibited from providing long-distance services. To promote competition in the local services as well, the Telecommunications Act of 1996 requires local exchange carriers to inter alia afford access to some parts of their networks to competitors. If the local exchange carrier is an ''incumbent local exchange carrier'', it also has to negotiate in good faith with those carriers which want interconnection, provide interconnection ''at any technically feasible point'', and provide non-discriminatory access to network elements on an unbundled basis. In a number of directives from the middle of the 1980s up to the present, the EC member states have been required to abolish all special or exclusive rights in the telecom sector. In almost all member states, full competition was introduced in 1998. Since the enactment of the Telecommunications Act in 1993, Sweden has been further on the road towards an open market compared to most European countries. This lead seems now to have been obliterated. There are two main opportunities to get transmission access&semic interconnection and by constructing a network of leased or owned lines. Interconnection means the physical and logical linking of networks which makes it possible to communicate with subscribers of another network. Under European law, telecommunications organizations have a right and an obligation to interconnect with each other. When constructing a network, the bottleneck is the local access network. There are a number of more or less advantageous alternatives to the traditional telecommunications network, the most suitable one is probably the cable TV network. In a directive from 1999, the Commission requires that cable TV networks and telecommunications network owned by a single operator are separate legal entities. The other main alternative for a competitive service provider is to lease the connections from the local switch to the customer and thus take over that customer. In September 1999, the Post and Telecom Agency handed over a proposal for new legislation in Sweden which would require Telia AB to lease out these local connections to rates based on costs. The Commission has in a notice clarified how it intends to apply the competition rules in the telecom sector. It considers that the concept of essential facilities will be of relevance, and notes that alternative networks like cable TV networks are not satisfactory alternatives yet. When establishing that an undertaking has a dominant position, the relevant market must be defined. With a very narrow market definition, ''provision of services to Mr X'', smaller network operators would also be required to give access to their networks. For the customer, there are reasons for that market definition. He could otherwise only subscribe to the network connected to his house. The Commission's statement that cable TV networks are not satisfactory alternatives yet is not in accordance with the Court's ruling in Bronner. Cable TV networks are already used for telephony services, They may be less advantageous for the competitor, but so were Bronner's alternatives as well. It is in the interest of the whole society that transmission capacity is constructed. It is therefore important that the legislation regarding the use of connections promote investments in new such infrastructure. It is necessary with special rules giving access to the former monopolists' networks on rates based on costs to promote competition, but in the long run it must be possible to make a profit on investments in transmission capacity. Otherwise it will not be built.},
  author       = {Lindskog, Magnus},
  keyword      = {Konkurrensrätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {Essential facilities for telecom and data transmission},
  year         = {1999},
}