Sweden:Wielding power

By Carl Johan Af Petersens

06 August 2013 at 15:55 BST

The Administrative Court of Stockholm has handed down two judgments regarding TeliaSonera's obligations as a company with significant market power on certain markets. Carl Johan af Petersens of Vinge analyses the findings.

Sweden: Going beyond the framework Kornik

In Sweden the Post and Telecom Authority (Sw.Post- och Telestyrelsen) (the PTS) is the regulatory agency dealing with the telecommunications markets. One of the PTS’ responsibilities is to identify markets which could benefit from ex ante regulation of companies deemed to have significant market power. The PTS’ responsibility is regulated in the Electronic Communications Act  implementing the Access Directive (2002/19/EC) and the Framework Directive (2002/21/EC). When issuing such decisions the PTS shall take into consideration the EU Commission’s recommendation on relevant product and service markets susceptible to ex ante regulation (the Recommendation).

Significant market power

During 2010 the PTS issued two decisions relating to markets four and five in the Recommendation, that is, the markets for network infrastructure access and wholesale broadband access (bitstream access) respectively. According to the two decisions TeliaSonera (the Swedish incumbent) was found to have a significant market power on the two markets and a number of obligations were imposed on it. TeliaSonera appealed the two decisions and in early 2013 the Administrative Court of Stockholm (the Court) handed down two judgments following TeliaSonera’s appeals. The Court to a large extent upheld the PTS’ decisions. There are several interesting aspects of the judgments; primarily concerning to what extent the obligations imposed on TeliaSonera are within the scope of the Act.

Judgment regarding network infrastructure access

Regarding the market for network infrastructure access the PTS obliged TeliaSonera to:
• provide access to the local loop at fixed locations; and
• under certain circumstances establish dark fibre.

In TeliaSonera’s submission the PTS’ decision to impose obligations regarding the provision of access to the local loop at fixed locations was flawed for two reasons. Firstly, the obligation did not relate to an obligation on the market that the PTS had defined as the relevant market in its decision. Secondly, the rules on access to the local loop concern access that directly connects end consumers and the PTS’ decision was related to access that did not directly connect an end consumer.

The Court upheld the obligation and stated that it was sufficiently clear from the PTS’ decision that the relevant market, as defined, also encompassed the imposed obligation. Furthermore, the Court held that under the Act it is not necessary for a fixed location to be physically located at the specific end consumer. It is sufficient that it connects to a public communications network, irrespective of the physical location of the access point.

According to TeliaSonera the PTS also imposed an obligation that went beyond the boundaries of the legal framework when obligating TeliaSonera to establish dark fibre where there is no existing dark fibre. TeliaSonera’s argument was that the rules in the Act and the Access Directive obligating a company with significant market power to give a third party access to, and use of, specific network facilities cannot encompass an obligation to establish dark fibre. The Court did not agree with TeliaSonera’s argument and stated that the obligation indeed was within the legal framework, though it did not elaborate on its reasons. Accordingly, the Court upheld the obligation imposed on TeliaSonera.

Judgment regarding wholesale broadband access

Regarding the market for wholesale broadband access the PTS obliged TeliaSonera to provide backhaul access by giving access to dark fibre, optical wavelengths or digital line capacity. TeliaSonera argued that an obligation to provide backhaul via optical wavelengths and digital line capacity could not be imposed in relation to the market for wholesale broadband access. In TeliaSonera’s view this obligation fell within market six of the Recommendation (wholesale terminating segments of leased lines). Furthermore, TeliaSonera argued that the obligation was neither material in order to attain the purpose of providing backhaul access; nor proportionate.

The Court took the view that the PTS had shown that the market for wholesale broadband access displayed problems regarding operators’ possibilities to gain access to backhaul capacity. Problems that, according to the Court, could not be rectified by regulating market six. Hence, the Court concluded that if TeliaSonera was unable to provide backhaul via dark fibre it was reasonable that TeliaSonera be obliged to provide backhaul via optical wavelengths and digital line capacity. However, the Court did clarify that the obligation to provide backhaul capacity was limited to certain parts of TeliaSonera’s network infrastructure.

Questions raised

The PTS’ decisions and the Court’s subsequent judgments raise interesting questions regarding the interpretation of the Recommendation and the Access and Framework Directives as TeliaSonera argued that the PTS imposed obligations that went beyond the legislative framework. TeliaSonera requested the Court to obtain a preliminary ruling regarding which obligations the PTS can rightly impose under to the Act, however, the Court decided to not obtain a preliminary ruling.

TeliaSonera has appealed the Court’s judgment regarding network infrastructure access to the Administrative Court of Appeal, but not the judgment regarding wholesale broadband access. In its appeal, TeliaSonera reiterated its request for a preliminary ruling and referred to a decision by a Danish court to request a preliminary ruling regarding an obligation similar to that imposed on TeliaSonera to establish dark fibre (see case C- 556/12). It remains to be seen if the Administrative Court of Appeal will grant TeliaSonera’s request for a preliminary ruling.

If the court decides to obtain a preliminary ruling it will, inevitably, prolong the procedure. Market players have often complained that the PTS’ and the court’s decisions take too long which gives rise to a “regulatory uncertainty”.  According to market players that is dissatisfactory on a market characterised by innovation. Thus, even if a preliminary ruling would clarify a perhaps ambiguous legal framework it would, in a sense, further contribute to mentioned “uncertainty”.

Carl Johan af  Petersens is a partner at Swedish law firm Vinge and specialises in the TMT sector. He has dealt with projects from telecoms licensing, broadband networks and services, to mobile communications and satellite systems as well as major M&A transactions. He also deals with IT and EU law. Contact: cj.afpetersens@vinge.se


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