Telecommunications Regulatory AuthoritySignificant Market Power Guidelines

CONTENTS

1Purpose and Scope of the Guidelines

1.1Background

1.2Legal Basis

1.3Interpretation

1.4Purpose of the Guidelines

2Definitions

3Market Definition Procedure

3.1Relevant Market definition

3.2Services

3.3Demand-side Substitutability

3.4Supply-side Substitutability

3.5Retail Services

3.6Wholesale Services

3.7Customer Groups

3.8Geographic Aspects of Relevant Markets

4Determination of SMP

4.1Criteria for Identifying SMP

4.2Identifying Individual SMP

4.3Identifying Collective SMP

4.4Abuse of Market Position by Service Providers with Significant Market Power

4.5Abuse of Market Position by Service Providers with Collective Significant Market Power

5Regulations to be Applied to Providers with SMP

5.1Principles of Regulating Providers with SMP

5.2Obligations to Provide Wholesale Services

5.3Obligations to Provide Retail Services

5.4Monitoring, Compliance and Penalties

Schedule A: Retail Markets

Schedule B: Wholesale Markets

List of Abbreviation

1Purpose and Scope of the Guidelines

1.1Background

  1. These Guidelines form part of the Regulations issued by the Telecommunications Regulatory Authority (TRA) as the independent sectoral regulatory authority for the telecommunications sector in Lebanon. These Guidelines are designed to serve potential and current market participants in this sector by providing clear and concise explanations of TRA’s actions in the field of Significant Market Power under the applicable law.
  2. These Guidelines constitute binding Regulations that state the official policies and procedures of the TRA during their period of validity. These Guidelines may be subject to review and amendment following the consultation and promulgation processes required by the law. Review and amendment hereof will be undertaken periodically as deemed necessary by the TRA in light of the development of the Lebanese telecommunications markets and/or changes to Lebanese national law impacting the Telecommunications Sector, among other possibilities.

1.2Legal Basis

1.2.1Telecommunication Policy

  1. The Government of Lebanon having determined to transform the telecommunications sector in Lebanon from a state-owned monopoly to a competitive market, open to private participation promulgated the Telecommunications Law (Law No. 431/2002, hereafter called the “Law” or “Telecommunications Law”) to achieve this aim.

1.2.2The TRA’s Mandate and the Telecommunications Law

  1. The Telecommunications Law ensures that an open, competitive market will bring pressure to bear on Service Providers and will lead to increased penetration of telecommunications services, lowering prices, improving efficiency of Service Providers and enhancing the quality and choice of services. Accordingly, the TRA is provided with wide ranging powers to promote competition and to guard against anti-competitive behaviour which would distort this market-based, competitive process. The provisions in the Telecommunications Law which address anti-competitive behaviour are consistent with the WTO Reference Paper on Regulatory Principles.[1]
  2. The TRA is charged with promoting competition in telecommunications (Telecommunications Law, Art. 5.1(C)). To that end, the Telecommunications Law has given the TRA a clear mandate to, among other things:
  • Establish an open, clear and transparent regulatory framework that minimizes legal, regulatory, and other barriers to entry;
  • Issue licenses;
  • Identify Service Providers with Significant Market Power;
  • Monitor and prevent abuses of Significant Market Power;
  • Monitor and prevent practices that would restrict competition;
  • Review any transaction or transactional relationship (e.g., interconnection), particularly involving Service Providers with Significant Market Power, to ensure that they will not restrict, undermine or distort competition; and,
  • Take all necessary measures, whether preventive (i.e., before abuse of Significant Market Power) or remedial (i.e., after abuse of Significant market Power), to protect competition and ensure a sustainable competitive market.
  1. Should the TRA find a potential or actual situation which diminishes competition, the TRA may take such measures as it deems necessary. While Service Providers with Significant Market Power are singled out for greater attention, the TRA is encouraged to take measures to increase competition rather than imposing restrictions on these Service Providers. In countering anti-competitive behaviour generally, the TRA is also encouraged to benefit from best international practices by considering applicable principles of competition law in countries with competitive telecommunications markets.
  2. The concept of “Significant Market Power” used in the competition provision of the Telecommunications Law (Article 30) is threaded through other sections of the said law, including provisions relating to interconnection (Article 29), rate and tariff regulation (Article 28), and the resale of services (Article 27). Consistent with best international practices and the WTO Reference Paper, a Service Provider with Significant Market Power is one that can materially affect participation in a market for a service as a result of its control over essential facilities or use of its position in the market.
  3. The Telecommunication Law provides for the regulation of the telecommunications sector in Lebanon by the TRA, mandating that it, inter alia, acts against anti-competitive behaviour and ensures market transparency and supervises Providers with Significant Market Power[2] (SMP). The authority and mandates of the TRA in this regard encompass specific provisions both authorizing the TRA to constrain Providers with SMP and providing for restrictions on such Providers, including initiating investigations, making determination, and imposing additional obligations upon such Providers. Beyond these mandates and specific provisions of the Law, the TRA may make reference to the principles and laws of other jurisdictions[3].

1.2.3TRA jurisdiction in context of other relevant Laws

  1. Given the interrelated nature of markets for goods and services, particularly those requiring or required by Telecommunications, the TRA understands that its jurisdiction and substantive standards concerning potentially anti-competitive conduct and particularly SMP are liable to affect and be affected by the standards and actions of other relevant governmental bodies and institutions.
  2. The TRA will assume the precedence of the Law as a lex specialis over other generally applicable laws that apply when determining the appropriate substantive standards and practices promulgated in the present SMP Guidelines. Regarding its jurisdiction over potentially anti-competitive conduct within the market for Telecommunications Services, the TRA will assume primary jurisdiction over such matters where it has jurisdiction over the parties potentially liable. In all other cases, the TRA will coordinate its actions with the appropriate governmental body involved and/or refer appropriate complaints, investigations or cases to such bodies. The following describes the understanding of the TRA with respect to several such norms and institutions:
  3. The TRA notes that it may have shared jurisdiction over competition issues with such regulatory bodies as may be created by virtue of a competition act under consideration by the government of Lebanon. Competition law sets generally applicable standards for all market actors and designates an appropriate regulatory with investigating and redressing conduct found to be in violation. Insofar as the provisions of the Law and these Guidelines issued thereunder constitute a more specific and more extensive basis for both preventive (ex-ante) and remedial (ex-post) action, in addition to the TRA’s specific expertise in the subject matter, TRA will assert primary jurisdiction where competition issues concern solely Persons and Services subject to its jurisdiction under the Law. In all other cases, including those concerning or concerned with telecommunications markets or goods, but including Persons not subject to jurisdiction by the TRA, the TRA will seek to refer the matter to the appropriate competition regulator.
  4. With regard to certain other laws ancillary to anti-competitive conduct and the bodies charged with their enforcement, including the protection of consumers under the aegis of the Ministry of Economy and Trade and the regulation of broadcasting matters other than Spectrum by the Ministry of Information, see the Consumer Protection Guidelines and the Spectrum Guidelines respectively for a detailed discussion.

1.3Interpretation

  1. Individual clauses containing the word ‘shall’ are mandatory requirements and are binding on licensed Providers of Telecommunications Services and applicants for such Licences.
  2. Individual clauses containing the word ‘should’ are recommendations to Providers but are not mandatory in and of themselves.
  3. Individual clauses containing the word ‘may’ are permissions to Providers.
  4. Individual clauses containing the word ‘will’ when applied to the TRA mean a non-discretionary obligation for the TRA to act.

1.4Purpose of the Guidelines

  1. The principal purpose of these Guidelines is to provide information and guidance to Providers with respect to the approach TRA will take in analysing the telecommunications markets, assessing if Providers have SMP and making declarations accordingly.
  2. The Guidelines describe processes designed to ensure that all Providers and applicants for Provider status are treated fairly and in a non-discriminatory manner.
  3. The Guidelines also aim to encourage good practice by Providers and to promote the provision of high quality of service to end-users, through technical and economic efficiency.
  4. TRA’s programme to control SMP will consist of four activities:
  5. Define Relevant Markets in terms of product/services, customer groups, retail/wholesale and geography/route.
  6. Carry out market analyses of each of the Relevant Markets, to determine whether any Providers have Significant Market Power (SMP), in those Relevant Markets.
  7. Issue Decisions as to Providers having Significant Market Power in a Relevant Market.
  8. Impose regulatory obligations on those Providers identified as having SMP.
  9. These Guidelines apply to all Providers of Telecommunications Services in Lebanon.
  10. These Guidelines do not apply to end-users of Telecommunications Services; they also do not apply to the importation and making available of Customer Premise Equipment (CPE) or Network Equipment of any kind.
  11. These Guidelines include the following schedules:
  12. Schedule A: Retail Markets
  13. Schedule B: Wholesale Markets.
  14. These Guidelines become effective when issued by the TRA Board and published in the Official Gazette and/or on the TRA website.

2Definitions

  1. In the event of conflict or ambiguity between the terms defined herein and the terms defined in the Licence or in the Telecommunications Law then the following order of precedence shall apply:

1. Telecommunications Law

2. The SMP Guidelines

3. Provider Licence.

  1. For the purposes of use in The Guidelines, the following terms will have the ascribed meanings:

Affiliate means any legal entity licensed to provide Telecommunications Services (a Provider) that is under common ownership or Control of another entity, directly or indirectly, where that other entity is a licensed Provider of Telecommunications Services. Where affiliation exists by means of ownership, a level of ownership sufficient to reach Control as defined herein will confer Affiliate status. Moreover, affiliation may also be found where Control is exercised through a third entity, whether or not such entity is a licensed Provider, when two or more Provider entities are controlled by it through whatever means. A Provider may also acquire Affiliate status by virtue of a management agreement of whatever kind when the managing entity is, or is controlled by another Provider.

Accounting Separation means the preparation of separate accounts for different businesses and parts of businesses run by the same company or group of companies, so that the costs and revenues associated with each business and part of a business (and transfers between them) can be separately identified and properly allocated.

Authority means the Telecommunications Regulatory Authority in Lebanon established by virtue of the Telecommunications Law (Law 431/2002).

Basic Telephony Services are Public Telecommunications Services limited to two-way real-time voice transmission within all of Lebanon offered as a Fixed Telecommunication Service over a Self-operated Network. Basic Telephony Services are classified for licensing purposes as requiring a Public Fixed Network licence.

Board in these Guidelines refers to the Board of the TRA constituted as the duly established management of the Authority and acting through a quorum of members.

Call Origination – the service of originating calls on a network, for completion either on the same or a different network.

Call Termination - the service of terminating calls on a network, whether originated on the same or a different network.

Carrier Pre-Selection – election by the customer of which Provider (or Carrier) will provide service on a permanent or semi-permanent basis.

Carrier Selection - election by the customer of which Provider (or Carrier) will provide service on a call-by-call basis.

Collective SMP – Significant Market Power attributable to two or more Providers collectively, through collusion, joint ownership, or other means.

Consumer is any natural or judicial person other than a Provider of Telecommunications Services. See also End-User.

Control is one measure which the TRA may use to determine the applicability of licensing or other ongoing regulatory obligations. Control over a Provider is defined either (a) in terms of direct or indirect ownership stakes of sufficient magnitude to exert power over the management of that Provider, or (b) where the management of an entity, whether by contract or otherwise, is carried out by another person or entity. Control over a Provider through ownership does not require majority ownership but may be exercised by a minority stakeholder capable of blocking decisions. Control over Infrastructure by a Provider is defined as any form of effective operational control over a Network and its use to deliver Telecommunications Services. A change of Control occurs when either (a) a blocking minority ownership changes hands irrespective of the form of the transaction, or (b) the management of a Provider is turned over to another person or entity in whole or in substantial part.

Cost Accounting - Service Providers with Significant Market Power shall develop cost oriented interconnection rates according to costing methodology and cost accounting guidelines prescribed by the TRA.

Customer means the Person who receives Telecommunications Services and pays the corresponding fees for a period of time by virtue of an agreement with or pursuant to terms established by the Service Provider.

Customer Premises Equipment (CPE) means any technical devices, including wiring that are suitable for connecting to the Network Termination Interface that is owned or controlled by an End User within his or her private premises without commercial purpose and which may be used to originate, route, terminate, store or convert any communication over the network. Importation, sale and use of such CPE may be subject to equipment standards specified in the Radio and Telecommunications Terminal Equipment (RTTE) Type Approval Guidelines but is not subject to licensing under the present Guidelines.

Decisions of the TRA are one form of Regulation by which the TRA, either by its Board or by delegated authority determines the rights and obligations of a specific party or for a specific situation subject to its jurisdiction.

Designated Service is a Telecommunications Service so designated by Decision of the TRA in consequence of an SMP finding of limited competition in a specific, limited geographic and service market. A Designated Service is associated with one specific Provider having SMP.

End User (or User) means any natural or judicial person, excluding Providers of Telecommunications Services, purchasing, consuming or using Telecommunications Services solely for their own consumption. Irrespective of whether an End User is an individual, household, or institutions of any kind, such End User may not provide access to Telecommunications Services to persons outside their respective Defined User Group, nor provide access on a commercial scale or for profit. End Users are Consumers.

Guidelines are TRA Regulations of generally binding effect as opposed to Decisions applicable only to named parties or situations. In the present text and unless otherwise stated, Guidelines mean the effective version of the present guidelines. Guidelines may be revised or amended by the TRA from time to time in accordance with its procedures, in which case any prior version or particular provisions thereof as the case may be, cease to be of any force and effect and may no longer be relied on.

Hypothetical Monopolist Test is a test to determine whether a Provider could increase prices in a market whilst retaining its volume of business.[4]

International Telephony is a Telecommunication Service for the provision of International voice service.

Internet Services are Data Services offering termination to the Internet provided as End-User Services. The Provider of such services is termed an Internet Service Provider (ISP).

Licence means an authorization granted under the Law and the Licensing Guidelines to provide Telecommunications Services, including, where applicable, the use of Radio Spectrum required to provide such service.

Network Equipment – equipment other than CPE, used within or attached to Networks by Providers in whole or in part to provide retail or wholesale services to customers.

Non-discrimination means supplying the same product/service to different customers on the same financial, technical and service terms.

Number Portability – service which will allow customers to change Provider whilst maintaining their access number.

Price Cap - A method of setting prices whereby the SMP Provider is given a limit on the average per usage (or per customer) revenue it may collect, but within that is given flexibility on how to set the prices, and is permitted to recover profits above those cost-of-service regulation would consider reasonable, up to some limit, as an incentive to be more efficient.

Provider means any individual or legal person providing Telecommunications Services to others on a commercial scale or for profit. The TRA may by Guideline or Decision set forth specific criteria concerning the scale of operations sufficient for a person to be considered operating on a commercial scale.

Regulations, or TRA Regulations, mean that body of rules promulgated by the TRA under the authority granted to it by the Telecommunications Law. Regulations take the form of Guidelines or Decisions. In addition to Regulations, the TRA may also promulgate non-binding documents which are not considered Regulations.

Relevant Market means a market segment as defined by TRA for purposes of determining Significant Market Power.