EU fines Telefónica ?152M over broadband pricing

By fixing its wholesale price for ADSL (Asymmetric Digital Subscriber Line) services close to its retail price for the same services, Telefónica restricted competition in the Spanish broadband market between September 2001 and December 2006, European Commissioner for Competition Neelie Kroes said Wednesday.

The pricing left no margin for competing operators to make a profit, she said, leading the Commission to fine the company for impeding competition.

In 2003, the European Commission imposed much smaller fines on Deutsche Telekom AG and France Télécom SA's subsidiary Wanadoo for similar pricing practices, but those fines had not proven a sufficient deterrent to Telefónica, Kroes said, adding that she hoped Wednesday's fine will have more impact.

However, ?152 million is "just a pinprick" compared to Telefónica's annual revenue of ?53 billion, and may still not be enough to deter former state monopolies from seeking to protect their market share as they introduce new access technologies, according to Ilsa Godlovitch, head of regulatory affairs at the European Competitive Telecommunications Association, a group representing new telecommunications operators.

"If I were an incumbent, and I thought that predatory pricing could get me a head start in the market for five years, I might take the risk," she said.

"As we move to next-generation access, as copper gets replaced by fiber, we are concerned that this might happen again," she added.

Godlovitch's concerns may be justified: Deutsche Telekom is pushing for an exemption from price regulation for new broadband services it plans to deliver over fiber.

Although the Commission opened its investigation of Telefónica in 2003, it was only when the Spanish regulator intervened that the company put an end to its predatory pricing. If it had continued, the fine could have been higher, Kroes said at a press conference in Brussels, according to a transcript..

The lack of competition means that Spanish broadband users pay around 20 percent more for service than their European neighbors, the Commission said.