The authority for COMMUNICATIONS GUARANTEES during the session of the Commission for infrastructures and networks of the October 5, 2005; Having regard to act July 31, 1997, n. 249 laying ' institution of authority for communications guarantees and rules on telecommunications and broadcasting systems»; Having regard to the Decree of the President of the Republic September 19, 1997, n. 318 laying down the implementing Regulation EC directives in the telecommunications sector ' and, in particular, article. 3; Having regard to the March 10, 1998 decree laying down «financing of the universal service in the telecommunications sector '; Having regard to resolution No. 8/00/CIR, bearing ' applicability of the mechanism for sharing the net cost of the universal service for the year 1999», as well as all investigative activities underlying the measure; Having regard to the judgments of the Lazio regional administrative court # 249/2002 and # 250/2002 of January 14, 2002; Having regard to resolution No 5/03/CIR laying «results of the renewal of proceedings on applicability of the mechanism for sharing the net cost of the universal service for the year 1999; Having regard to the judgment of the State Council # 7257/2003 of July 8, 2003; Having regard to resolution No. 2/05/CIR, establishing a "Renewal of proceedings concerning the applicability of the mechanism for sharing the net cost of the universal service for the year 1999; Having regard to resolution No. 27/05/CIR laying «extension of deadline for conclusion of proceedings '; Having regard to the communication from the Commission to the Council, the European Parliament, the European economic and Social Committee and the Committee of the regions n. Com (2005) 203, of April 25, 2005 on the review of the scope of universal service in conformity with art. 15 of Directive 2002/22/EC; Having regard to the communication from the European Commission in November 27, 1996, # 608, bearing ' criteria for the assessment of national systems of costing and financing of universal service in telecommunications and guidelines for Member States on operation of such schemes; Having regard to the report of the company «Black» for «An analytical framework for the possible establishment of a fund OSU (universal service obligations) in Italy ", of July 2000; Having regard to the report of the company «Black» for «Analysis of determining the net cost of the universal service in the telecommunications sector in Italy ", of July 2000; Having regard to the decision of the Commission's infrastructure and networks July 28, 2005 approving the schema di delibera «Renewal of proceedings concerning the applicability of the mechanism for sharing the net cost of the universal service for the year 1999» for the purpose of submitting to the antitrust authorities market, for the acquisition of its opinion, in accordance with the aforementioned judgment of the State Council; Having regard to the opinion of the competition authority and the market of October 3, 2005; In view of the procedural documents;
Considered the following: 1) the path of inquiry. 1. on March 9, 2005 the Authority initiated by resolution # 2/05/CIR investigation proceedings establishing a ' Renewal of proceedings concerning the applicability of the mechanism for sharing the net cost of the universal service for the year 1999 "in order to comply with the ruling Council of State # 7257/2003 July 8, 2003. 2. the judgment of the Council of State upheld the appeal against the ruling of the TAR of Lazio # 250/2000 and annulled the resolution 8/00/CIR within the extent of the obligations of the Fund contribution to mobile network operators, ordering the authorities to ascertain the degree of substitution, attention is between fixed and mobile telephony as well as to request in this regard, an opinion to the antitrust authority market. 3. The proceedings and was therefore intended to ascertain the degree of substitution, attention is between voice telephony services offered on mobile and fixed networks in a context where market mechanisms fail and do not serve the social purposes of the universal service. The remaining effects of resolution 8/00/CIR on which there were no defects in the investigation by the judgment of the State Council were not subject to review in this proceeding of inquiry # 2/05/CIR. 4. as part of the conditions of participation in the proceedings as defined by art. 2 of resolution No. 2/05/CIR, the Authority received by the company «Vodafone Omnitel» and the company «Telecom Italy and 26 April 29, 2005 dates respectively the ' comments on the subject of the proceedings. 5. on May 27, 2005 the authority required the company "Telecom Italy» information about traffic and revenues resulting from the provision of voice telephone service in unprofitable areas served based on universal service obligations in order to evaluate the relationship between voice telephony services offered on fixed and mobile networks. 2) the judgment of the State Council # 7257 of July 8, 2003. 6. in 2000, «Vodafone-Omnitel» presented to the regional administrative Court of Lazio (TAR) an appeal in respect of resolution No. 8/00/CIR in order to cancel, among other things, the effects resulting from the mechanism for sharing the net cost established by the authority. In particular, the applicant considered that the mechanism for sharing the net cost cannot be applied to mobile network operators, as the degree of substitution, attention is between fixed-line and mobile telephony services offered on was not sufficient to include these services in the same relevant market. 7. In its judgment No. 250 of January 14, 2002, the TAR, has rejected the appeal of "Vodafone-Omnitel» is limited to the assessment of the degree of substitution, attention is between services, as well as with regard to the alleged obligation on the part of the authorities to request an opinion to Italian Antitrust Authority market. 8. "Vodafone-Omnitel» thereupon brought an appeal to the State Council for the reform of judgment No. January 14, 2002 250 of the TAR. 9. By judgment no 7257/2003, the Council of State upheld the appeal by ordering the authority to ascertain the degree of substitution, attention is on the demand side and on the side the offer between voice telephony services offered on fixed and mobile telecommunication networks and to require, for the purpose of the investigation, an opinion to the antitrust authority market. 10. The grounds for the judgment of the State Council show that the assessment of the degree of substitution, attention is between fixed and mobile telephony services it is necessary to determine whether the mobile network operators are required to contribute to the universal service fund intended to finance the net cost incurred by ' Telecom Italy». 11. The assessment of such typical activities ' within the substitution, attention from the authorities responsible for the protection of competition, at the time of the definition of the relevant markets. For this reason, the decision of the State Council shall instruct the authorities over the investigation of the substitution, attention is also requesting an opinion between departments, the Italian Antitrust Authority market. 3) observations of operators in the proceeding # 2/05/CIR. 12. In the course of proceedings for retrial of the mechanism for sharing the net cost of the universal service for the year 1999, the operators "Vodafone-Omnitel and Telecom Italy» they transmitted their contributions in order to comment on substitution, attention is between fixed and mobile telephone services as funding policy to the universal service Fund. 13. "Vodafone-Omnitel," he indicated in the legislation and case law, for the assessment of the degree of substitution, attention, case C-333/94 Tetra Pak v Commission, the Commission's recommendation on relevant markets and related explanatory notes as well as resolution No. 410/04/CONS of authority. «Vodafone-Omnitel» felt that assessing the substitution, attention is between fixed and mobile services is the precondition for valutazionedello-competitive state between mobile network operators and the universal service provider. In this context, the level of competitive ' between fixed and mobile network operators, in turn, is instrumental in defining the imposition of obligations of contribution to the Fund. 14. "Vodafone-Omnitel» he then outlined in great detail, principles and methods for the analysis of substitution, attention. According to this approach, the level of substitution, attention is on the demand side and the supply side should be assessed on the basis of cross-elasticity between services resulting from a hypothetical and significant increase of the price of a particular service. 15. Telecom Italy has shown, contrary to «Vodafone», that the criteria for the definition of the relevant market, typical of antitrust law, should not be applied to determine which categories of operators should contribute to the Fund. The analysis of substitution, attention is between services is based on ex-ante evaluation methodologies and so on estimates related to elasticity perspective. «Telecom Italy» believes instead that the contribution to the Fund should be established ex post assessing the replacement process that you went over time, occurring between mobile and fixed. Telecom Italy has supported this position by returning a detailed analysis on the high level of substitution between fixed and mobile telephony reached in 1999. In particular, indicated the trend of market variables as the number of users with only a cell phone;
the number of fixed-line and mobile phone subscribers;
traffic originating from fixed and mobile networks;
public telephone traffic;
traffic for individual leaders and particularly that of fixed-mobile. 16. «Telecom Italy» has also pointed out that the mobile network operators gain economic benefits from the existence of universal service obligations, in particular for revenues from incoming and outgoing traffic between the mobile and the areas that are not profitable. This shows, on the one hand, the relationship between fixed and mobile networks, and on the other hand, the paradox of letting mobile operators the "advantage" arising out of the existence of areas that are not profitable without the simultaneous obligation to contribution fund. 17. «Telecom Italy» concluded finally that the authority should aim to establish the existence of a substitution, attention ' ex-ante between fixed and mobile telephony services but should ascertain only if the furniture had ex-post on the income statement of voice telephony and public network (services for which Italy «Telecom» demanded a net cost). 4) The legislative and regulatory frameworks of reference. 18. art. 3, paragraph 6, of the Decree of the President of the Republic No. 318/1997 foresaw that ' where, in accordance with the provisions of this article, the provision of universal service obligations represent an unfair burden for the body or bodies responsible for providing universal service, there will be a mechanism to share the net cost of these obligations with other bodies operating public telecommunications networks, with publicly available voice telephony services providers and with bodies providing mobile and personal communications services ". 19. The category of mobile network operators and is therefore included a priori between the operators required to contribute to the net cost of the universal service through the sharing mechanism. 20. art. 2, paragraph 2, of the Decree March 10, 1998 on the financing of universal service in telecommunications essentially reiterates the provisions of the Decree of the President of the Republic No. 318/1997 ' within the meaning of art. 3, paragraph 6, of the rules, there will be a cost sharing mechanism based on the principles of non-discrimination, transparency and proportionality, bearing bodies operating public telecommunications networks, which provide the public voice telephony services, in proportion to the use by such entities of public telecommunication networks, mobile and personal communications services or providing nationally» by clarifying that the sharing mechanism must also be applied to mobile network operators. 21. in that regard, it is to be noted that the Decree March 10, 1998 regulates in detail the mechanism for sharing the net cost and the mechanism exemption from contribution to the universal service Fund for operators new entrants. The art. 6, paragraph 1, of the Decree March 10, 1998, stipulates that ' the authority, taking into account the competitive conditions in the market can and will evaluate the opportunity to introduce a mechanism for exemption from the contribution fund by the telecommunications bodies new entrants in the field». Again, the March 10, 1998 decree does not provide for the exclusion of mobile network operators by contribution nor the exclusion of operators as a function of the transmission technology used or the degree of substitution, attention is between services. 22. The Decree gave March 10, 1998 application to the national legislation taking into account the provisions of the European Commission's communication of November 27, 1996 evaluation of national policy costing and financing of universal service in telecommunications and guidelines for Member States on operation of such schemes. The communication from the European Commission stated, in fact, the General principles (non-discrimination, transparency and proportionality) for the contribution to the universal service fund telecommunications operators with reference also to the substitution, attention is between fixed-line and mobile services. In this regard, the Decree March 10, 1998 in addition to incorporate these principles, justifies in the introduction, the mobile network operators ' contribution to the universal service Fund by treating in detail the development objective of elements related to the significant diffusion of telecommunications services offered through the mobile network and the relationships between fixed and mobile networks in terms of turnover , voice telephony service offered and to reduce costs of access. Replacement relationships and complementarity between mobile and fixed-line services are also highlighted, in the introduction of the Decree March 10, 1998, with particular reference to the gradual consolidation of the process of convergence between fixed and mobile networks also sanctioned by the European Commission's communication [COM (97) 513] and the number of subscribers to mobile network services than those on the fence and Finally, to economic conditions applied by mobile operators to end customers characterized by absence of access charges and reduced prices for local traffic. 5) the assessment of the degree of substitution, attention is between fixed and mobile telephony. 23. The Authority has the applicability of the mechanism for sharing the net cost between telecoms operators if the burden of the net cost incurred by the subject universal service provider is unjustified. The evaluation of the iniquity of the burden represents a distinct and logically prior to the phase concerning the identification of persons indebted to the universal service fund contribution for which the Council of State did not detect defects in inquiry. The criteria underlying the evaluation of the iniquity of the burden of the net cost are different those used to identify which topics are recipients of universal service fund contribution obligations. The analysis of substitution, attention is between fixed and mobile telephony is aimed solely to establish whether the requirements of contribution to the Fund are likely to be imposed is fixed-line operators and mobile network operators. 24. The Authority has then proceeded to assess the demand and supply side substitution, attention is between voice telephony services offered on fixed-line and mobile network as required by the judgment of the State Council in a context of universal service in order to identify the categories of traders to which impose obligations of contribution to the Fund. 25. The product and geographic context of reference is represented in particular by the country's unprofitable areas, served at a loss by the universal service provider. The area doesn't rewarding it is defined as the unprofitable customers served by the same basin Stadium central line which takes place typically claim lines for concentration and functions relating to the copper network. Retail access service allows the consumer to make and/or receive calls from voice telephony and to take advantage of some of the related services under art. 3, paragraph 1, point a), of the Decree of the President of the Republic # 318/1997. The art. 3, paragraph 4, of the Decree of the President of the Republic # 318/1997 also provides that the services referred to in paragraph 1 are to be offered affordable and non-discriminatory economic conditions than the geographical location of the user. 26. with regard to the geographical context of the universal service, it is marginal geographical areas of the country, located mainly in mountain or hill where the density of population is particularly low and the average income per capita is lower than the reference province, business customers are lower than the average percentage of the province and the economic conditions applied to final customers are undifferentiated geographically under universal service obligations. 27. The Authority has taken steps to ensure product/geographic in this context the existence of demand-side substitution, attention is both supply-side between voice telephony services provided over fixed and mobile networks. 28. The substitution, attention was assessed by determining the behavior of customers ' Telecom Italy» as a result of a hypothetical decommissioning of access lines in areas that are not profitable. In this case, in fact, it was ascertained that a large volume of traffic (about 90% in 1999 and 2000, the 95% in 2001 and 2002) would have been sourced with mobile terminals, should the universal service provider had decided not to serve unprofitable areas through the fixed telecommunications network. Such substitution, attention has been evaluated over the years, even by those reviewers within the verification activities of the net cost calculation (consorzio ERCS-WIK-Black for the year 1999, «BLACK» for the 2000, 2001, 2002 by Europe economics for the Analysys). In this context, the evaluation of substitution, attention is between voice telephony services offered on fixed and mobile networks is required to determine the so-called replacement revenues, which have a significant impact on the total net cost. 29. revenue of replacement can be defined as revenue that "Telecom Italy» would not lose despite disabling an central area, a telephone line to a client or a public telephone kiosk, as customers turned off would decide to make use of, for example, to alternative phone lines (friends, neighbors, work stations, public telephones) present in adjacent areas profitable. 30. The quantification of replacement income also depends on the level of substitution, attention is between fixed and mobile telephony, in the sense that with increasing substitution, attention is an increasing amount of traffic moving from the fixed network to the mobile network of Telecom Italy. The occurrence of a significant level of substitution, attention is fixed and mobile telephony services including acts thereby a loss of traffic for Telecom Italy and a decrease of so-called replacement revenues. Because these are allocated head count decreased revenues that the area doesn't rewarding follows, the greater the substitution, attention, less the net cost of an area not lucrative. Therefore the analysis of substitution, attention, which is made by the Auditor during the audit activities of the net cost calculation, is considered in the assessment of the net cost and contributes to its quantification, reducing their value to increase the degree of substitution, attention. 31. in this regard it is worth noting that the high degree of substitution, attention is between fixed and mobile telephony ascertained by those reviewers has reduced significantly the net cost of «Telecom Italy» admitted to sharing mechanism by the authority. 32. The substitution, attention is on the supply side represents a phase of the subsequent analysis and ancillary with respect to substitution, attention is on the demand side. This is to verify the existence of potential competition resulting from the hypothetical choice of the universal service provider to offer the service of access to voice telephony on fixed networks for customers in areas that are not profitable. In other words, the substitution, attention is on the supply side in the event that, following the decommissioning of unprofitable areas access lines from "Telecom Italy», traders in fixed-line access market are available to increase production capacity to fulfil universal service obligations, or the operators in other markets may convert some production to enter the fixed network voice telephony access market in the geographical entity of areas that are not profitable. 33. In the context of universal service, the substitution, attention is on the supply side can only be assessed through a mechanism of ex-ante designation of universal service provider which can participate in equal terms all telecoms operators. This mechanism of ex ante designation was never implemented in the telecommunications sector Italian and European level. In the context of the consultation of 2002 's authority, on the introduction of competitive mechanism for universal service provision, several operators had expressed favorable comments about the possibility of improving the efficiency of universal service provision through competitive selection of suppliers. It is therefore possible to exclude a priori that telecoms operators may be interested in participating in an ex-ante because same designation mechanism of the indirect benefits of universal service obligations. 34. in the light of the circumstances, the Authority considers that the conditions for establishing the existence of a certain degree of substitution, attention is also potential supply-side access service to voice telephony on fixed networks in the context of universal service. 35. As part of the process of participation in proceedings governed by resolution # 2/05/CIR an operator has outlined the methodology to be used to determine the degree of substitution, attention. In particular, it considers that the substitution, attention is between services should be assessed on the basis of so-called hypothetical monopolist price tests (Small but Significant and Non-transitory Increase in Price) from which it is possible to detect cross-elasticity and therefore the degree of substitution, attention is between fixed and mobile telephony services. 36. The authority, in the case, did not consider it appropriate to assess consumer behaviour on the basis of changes in relative prices for telephony services under universal service obligations does not exist by definition any kind of competition and current prices are below cost. These services are offered exclusively at a loss, as required by art. 3, paragraph 7, of the Decree of the President of the Republic # 318/1997, where market mechanisms fail and it's possible the provision of such services only through the imposition of primary and secondary legal requirements to one or more designated operators, to protect certain categories of users (residing in areas that are not profitable, make use of telephone stations unprofitable and have special social needs). In fact, it would not make sense to talk about substitution, attention ' and thus competitive ' between services on the basis of price (SSNIP TEST test), required by antitrust practice in defining the relevant markets, where the universal service Institute pursues social and public interest purposes almost never accessible through the balance between the economic conditions of the demand and supply of the market. 37. the report and the process of consolidation of convergence between fixed and mobile networks and services is evident also in the light of the trend of ex-post substitution and complementarity that it went as to determine in the telecommunications sector. The presence of a certain degree of competition between fixed and mobile was evident already since 1999 when according to a survey of consulting firm Gallup, detected from the analysis of the "Black" in assessing universal service Fund, 5% of Italian users with some telephone apparatus possessed only a mobile phone. This means that 5% of customers of mobile operators would use the landline Telecom Italy if it had not existed the voice telephony service offered over mobile networks. The same result for the year 1999 is confirmed by an analysis published ISTAT on August 4, 2003 (Figure 1) shows that Italian families who own only a mobile phone in the time 1997-2002 went from 1.8 to 13.1%.
Figure 1 Households with landlines and mobiles (%)----> See figure on page 51 See figure on page 51