Commission suspends Estonian regulator's costing methodology for Elion

Photo: Raigo Pajula

The European Commission has suspended a proposal from the Estonian Competition Authority (ECA) for calculating regulated fees which the dominant operator, Elion Ettevoted AS, can charge other operators to use its broadband infrastructure.

The Commission is concerned that ECA's approach may not be compatible with European Union telecoms rules, could hamper investment in broadband and could also create artificial barriers in the market.

The Commission said the Estonian regulator proposes to set the fees using a method of calculation valuing the assets at their initial historical cost rather than their current cost. The Commission believes that this approach could lead to artificially devalued access prices for copper. Although these access prices may benefit competition in the short term, they are likely to hamper efficient investment and innovation in new and enhanced infrastructures  and ultimately risk impeding operators from recovering their investment costs.

If ECA's approach were maintained, operators from either inside or outside Estonia would have less incentive to invest in Estonia, with a negative effect on trans-European telecommunication markets, it said

European Commission Vice-President Neelie Kroes said: "ECA is proposing exactly what I want to avoid: inconsistent access prices across the EU which can have a dampening effect on investment in modern networks. I urge ECA to put forward a new proposal which will ultimately give national and multinational operators the right incentive to replace the old legacy copper network with modern technology."

The Commission has sent a "serious doubts" letter to ECA and the regulator now has three months to work with the Commission and the Body of European Telecoms Regulators (BEREC) to find a solution to this case, a press release by the Commission said.

In the meantime, implementation of the proposal is suspended.

The Commission received a draft proposal from ECA on May 13 concerning both the market for wholesale network infrastructure access at a fixed location and the market for wholesale broadband access in Estonia, in which the Estonian regulator proposed to use a "top-down historical fully distributed cost model" to calculate prices for access to both copper and fiber lines in both markets.

The Commission said that while it has acknowledges ECA's margin of discretion over the choice of costing methodology to regulate access rates, it considers that the evidence provided by ECA is insufficient to justify its choice.