Consultation-Etisalat Comments on Reponses 29 Sept 2011

8/10/2019 Consultation-Etisalat Comments on Reponses 29 Sept 2011

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TRA Consultation on

competition assessment andproposed remedies in relevantmarkets : Comments on

Responses

29 September 2011


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Page 2of 25

TableofContents

1 ExecutiveSummary.........................................................................................................3

2 MarketDefinition..........................................................................................................10

3 AssessmentofMarketPower........................................................................................11

4 RetailmarketswhereEtisalathasbeenfoundtohavemarketpower(RM1ARM9A)...12

5 Retailmarketswhereduhasbeenfoundtohavemarketpower(RM1BRM9B)...........14

6

WholesalemarketswhereEtisalathasbeenfoundtohavemarketpower(allmarkets).18

7

Wholesale

markets

where

du

has

been

found

to

have

market

power

(all

markets)

.........

24


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1 Executive Summary

Etisalat welcomes the opportunity to provide comments on thesubmissions of other parties as part of this consultation.1 This is animportant component of the consultation process allowing the views ofothers to be tested and debated.

This submission only provides comments on selected aspects of the dusinitial submission to the TRA. It does not respond to every issue raised bydu. For the avoidance of doubt, where Etisalat has not providedcomments on a particular area of dus submission, this should not be

construed to mean that Etisalat necessarily supports such views.

dus submission is inconsistent and in places blatantly self-serving. Duuses one argument to suggest increased regulation of Etisalat and thensubsequently the same argument to argue for reduced regulation onitself, regardless of the fact that both operators are in identical positionsof having been found to have market power due to their control ofnetwork infrastructure.

du uses international examples from countries that are fundamentallydifferent from the UAE offering no justification as to why these marketsshould be used as precedents.

Etisalat makes the following specific comments:

It is unnecessary to identify further markets at this stage of theconsultation. A consultation on defining markets has already takenplace and the TRA has already issued a Determination.

Etisalat disagrees that the nature of dus market power in fixedmarkets is fundamentally different to that of Etisalat. The twooperators should be regulated using the same approach with the sameremedies unless there are specific reasons for why this should nothappen.

Etisalat considers it critical that the regulatory burden is not skewedin favour of du as this could substantially reduce Etisalats ability tocompete going forward as well as having adverse impacts oncompetition more generally. This applies to resources and costs for

1Besides Etisalat, du and UAE Communication and Media Industry Group (UCMIG)responded to the TRA consultation.


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compliance as well as for time delays imposed through retail price

approval remedies

The table below provides a summary of Etisalats views, the details ofwhich are provided later in the main part of the submission.


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Summary Table: Etisalats response to selected aspects of dus initial submission

Market number dus comments Etisalat Response

High level commentson market definition

The TRA should define anadditional market forwholesale physical networkinfrastructure access at afixed location,independently of wholesaleservices market.

The TRA has already conducted a consultation on market dinterested parties (including du) have had the opportunity Following this, the TRA issued a determination on the numbdefined. No additional markets should be identified as preview.

Market powerassessment

A number of proposedremedies on du should beremoved based on theprinciple of proportionalitydue to du having a smallernetwork footprint and asmaller fixed customerbase when compared toEtisalat.

du and Etisalat have market power in fixed markets basedrationale that of control of the fixed infrastructure geographic markets. There is therefore no difference rationale for market power and this should flow through toappropriate remedies.

Given the unique characteristics of the UAE market there isimilar remedies should apply to operators found to havequivalent markets.

Retail Markets whereEtisalat has market

power (RM1A- RM9A)

Premature to removeEtisalats retail price

approval obligations whena range of wholesaleremedies are yet to be

While the TRA is not proposing to remove retail regulations period of this market review, Etisalat considers that onc

comprehensive suite of wholesale remedies begins to takappropriate to relax retail regulations on both operators market share triggers).


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fully implemented.

The wholesale remediescurrently beingimplemented are unlikelyon a standalone basis toimpose any practicalconstraint over Etisalatover the short to mediumterm

Etisalat disputes the view that wholesale remedies willpromote a properly functioning competitive market.

Markets RM5 and RM6 should be reassessed by the TRA as ththat they are or will shortly become competitive.

Retail Markets wheredu has market power(RM1B RM9B)

All of dus proposed retailprice notificationobligations (and theassociated self-certification requirements)should be removed.

All of Etisalats proposedretail regulations should beapplied.

dus arguments are clearly inconsistent and self-serving. Dex-ante obligations on an operator in markets where it has market power due to having control over infrastructure wand clearly inconsistent with international best practice. Wdone internationally it has been as a result of wholesaleretail competition. This is not yet the case in several mincluding RM1B RM9B

du presents misleading international evidence of regulatorsecond fixed operator in a number of other markets. In tcountries highlighted by du, regulators have decided on reassessment of market power the same approach used by tboth Etisalat and du have been found to have market powappropriate that both operators are regulated. In the majohighlighted by du it is only the incumbent that has been fopower.

Etisalat disagrees that du should escape from any regulator


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retail level on the basis of such regulation not being proregulations should be applied to address the potential for anti-competitive manner. The classic example to use hKingston Communications (KCom) in the UK and BT. KComthe UK regulator to have market power in a specific geograequal to its network footprint (i.e. the region of East Yorksanalogous to the way the du and Etisalat networks have uniq

Wholesale Marketswhere Etisalat hasmarket power (all)

du agrees with TRAsproposed remedies onEtisalat and proposes a

range of additionalmeasures.

The TRA should reconsider its assessment of competition looking analysis provides evidence that the market is compe

Etisalat agrees with du about the need for more detail oobligations (including the content of the proposed RO anagreement) and made similar points in its initial submissionconsiders that these issues should be subject to a further TRA on the detail of the RO. Separate consultations on practice in other countries.

The TRA should clearly differentiate its approach to regulatcompared to other wholesale access services (such as Bitsand site sharing).

Any ex-ante regulatory obligations including any introductioand enforcement regimes (as suggested by du) should apply

that it also has been found to have market power in a


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markets and also has a non-discrimination requirement.

Etisalat strongly disagrees that it should face an ex-ante reto provide access to its cable landing stations.2Such landingreplicable (evidenced by the landing stations that hestablished by du in the UAE). The ability to replicate severely weakens the underlying rationale for imposiobligation in the first place.

Etisalat considers that any additional types of remedieproposed by the TRA would be premature and disproportionwholesale remedies are introduced into the market (includin

of structural remedies), the current range of wholesale remcomprehensive wholesale Bitstream access product) shoulimpact on the competitiveness of the market.

Wholesale Marketswhere du has marketpower (all)

du should face fewerregulatory obligations thancurrently proposed. Inparticular, du argues thatit should not have toprepare a Reference Offer(RO).

Etisalat notes that the current TRA proposals mean that dregulatory obligations than Etisalat, so dus proposals wouldasymmetrical treatment of operators that have both been fopower in a range of wholesale markets. This woudiscriminatory.

Etisalat does not agree with du that it should escape fromprepare a RO. Etisalat notes that a RO covers more than jus

that Etisalat will be keen to negotiate with du to provide network areas moving forward, it will be important for Etis

2See pp. 67-69 of Etisalat initial submission to the TRA for a detailed discussion of Etisalats views on this issue.


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market players in the future that a comprehensive RO is ava

Nevertheless, Etisalat agrees with du that interconnectioreciprocal between the operators. This is consistent with out in its initial submission that footnote 70 of the TRA coninterconnection pricing should be revised.

du should also be required to produce regulatory accountsbasis. This is needed in order for the TRA to have comfoffered by du are not set at anti-competitive levels.


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2 Market Definition

2.1 Summary of dus position

du proposed that the TRA define an additional market for wholesalephysical network infrastructure access at a fixed location, independentlyof wholesale services market.3

2.2 Etisalats response

Etisalat does not agree that additional markets should be defined at this

stage of the consultative process. The TRA has already conducted aconsultation on market definition, where interested parties (includingdu) provided their views.4Following this, the TRA issued a determinationon the number of market to be defined.5

3Emirates Integrated Telecommunications Company, PJSC [du] (2011) Response toTRAs consultation on competition assessment and proposed remedies in RelevantMarkets Redacted Version, pp. 9-12.4TRA (2010) Consultation: The definition of Relevant Markets for the purposes of exante market reviews, 4 October.5TRA (2011) DETERMINATION NO (1) OF 2011: Relevant Markets for TelecommunicationServices and Related Products in the UAE, 23 January.


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3 Assessment of Market Power


du argues that market power is always a question of degree and thedegree of market power should determine the amount of regulation.6

du argues for the removal of a number of remedies on du based on theprinciple of proportionality due to du having a smaller network footprintand a smaller fixed customer base when compared to Etisalat.7

3.2

Etisalats response

Etisalat does not accept dus argument that du should face materiallylower regulatory obligations than those imposed on Etisalat in similarmarkets where it has been found to have market power. Du appears touse the argument of degrees of market power to advocate that theyshould face reduced remedies. However, Etisalat considers that themarket power of both operators is similar. Etisalat notes that marketpower should be determined with reference to the specified marketsdefined, not on the overall size of the respective businesses.

The two operators in the fixed market in the UAE have rolled out

networks in largely separate geographical areas. As a result bothoperators have sole control over the fixed line infrastructure in certaingeographical areas. Consequently, there is a strong case that equivalentremedies should apply where these operators have been found to havemarket power. Applying reduced remedies in one set of marketscompared to the other markets (distinguished only by their respectivegeographic coverage) could leave customers in some markets with asubstantial reduction in choice and other benefits arising fromcompetition.

Equivalent obligations should apply to each operator in order to protectagainst anti-competitive behaviour. As Etisalat noted in section 3.4.1.1

of its response to the TRA consultation, there are no objective measuresby which the market power of one operator is stronger or moredetrimental to consumer than the other so it is unclear how a greaterregulatory burden on Etisalat can be justified.

6See dus initial redacted submission to the TRA, p. 13.7See dus initial redacted submission to the TRA, p. 23 (section 4.2).


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4 Retail markets where Etisalat has been found tohave market power (RM1A RM9A)


du argues that it is premature to remove Etisalats retail price approvalobligations when a range of wholesale remedies are yet to be fullyimplemented.8

du also argues that the wholesale remedies that are currently beingimplemented are unlikely on a standalone basis to impose any practical

constraint over Etisalat over the short to medium term.9


Etisalat observes that TRA is not proposing to remove retail regulationson Etisalat over the period of this market review. These regulations arevery similar to the regulations that Etisalat currently face. Etisalatconsiders that once the forthcoming comprehensive suite of wholesaleremedies begins to take effect it will be appropriate to relax retailregulations on both operators in tandem.

Etisalat disputes dus view that wholesale remedies will be insufficientto promote a properly functioning competitive market. With appropriatewholesale regulation in place, the current regulatory restrictions (andcosts10) placed on operators in the retail market can be relaxed. Thisapproach is consistent with that taken by regulators in many othermarkets.11

Etisalat has proposed the introduction of market share triggers thatwould introduce automatic reductions in retail price regulation in lieu ofwaiting for the next market review.12 Etisalat considers that thisproposals merits consideration by the TRA as it will allow the regulatory

8See dus initial redacted submission to the TRA, pp. 13-14 (Section 3.1).9See dus initial redacted submission to the TRA, p. 14.10Etisalat agrees with dus view (as outlined on page 17 and 18 of dus submission tothe TRA) that the TRAs retail regulation proposals will impose considerable compliancecosts in operators.11For a detailed discussion on this, see Etisalats initial submission to the TRA, p. 46-47(section 3.1).12More detail on the market share trigger proposal can be found in Etisalats initialsubmission to the TRA, p. 42 (section 3.4.1.2).


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regime to adapt in a more dynamic way to changing competitive

conditions.

As outlined in Etisalats initial submission to the TRA 13, and based on aforward looking analysis, markets RM5 and RM6 should be reassessed bythe TRA as there is a strong case that they are or will shortly become competitive. Given this, ex-ante remedies in these markets (such asretail price approval and notification requirements) should be removedover time.

13See p. 33-40 (section 2.2.5 and 2.2.6) of Etisalats initial submission to the TRA.


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5 Retail markets where du has been found to havemarket power (RM1B RM9B)


du argues for the removal of all proposed retail price notificationobligations (and the associated self-certification requirements)applicable to dus supply of fixed line services.14

du argues that this would be consistent with the principle ofproportionate regulation and would take better account of dus relative

size and constraints on dus ability to take advantage of its marketposition.15

Using the same arguments of proportionality, du argues that Etisalatshould face the full suite of proposed retail regulation. Where they areapplied, du argues that based on international best practice, they shouldbe applied in an asymmetric manner and only to the incumbent operator(ie. Etisalat).16


dus arguments are clearly inconsistent and self-serving. On the onehand du argues that retail obligations should be maintained on Etisalat inboth fixed and mobile markets over the medium term as wholesaleremedies have not been implemented and would be unlikely to imposeany practical constraint in the short to medium term. However, in fixedmarkets where du has been found to have market power, similararguments do not appear to apply. Instead, du argues that it should faceno regulatory obligations on its retail operations, even in markets whereit has been found to have market power. Deciding to apply no ex-anteobligations on an operator in markets where it has been found to havemarket power would be undesirable and clearly inconsistent withinternational good practice.

Given the market definitions determined by the TRA for the fixedmarket, the same approach needs to be followed for du and Etisalat asboth have market power in their respective geographic markets. This is

14See dus initial redacted submission to the TRA, p. 14 (section 3.2).15See dus initial redacted submission to the TRA, pp. 14-17 (section 3.2).16See dus initial redacted submission to the TRA, p. 15 (section 3.2).


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based on each operator owning the only access infrastructure connecting

customers in their respective fixed geographic markets.

du presents misleading international evidence of regulatory treatment ofthe second fixed operator in a number of other countries. Whiledifferent countries have different regulatory regimes, it is a generaleconomic principle that ex-ante obligations should be imposed onoperators found to have significant market power. In the majority of thecountries highlighted as examples by du, regulators have decided onremedies based on an assessment of market power. This is the sameapproach used by the TRA. In the UAE both Etisalat and du have beenfound to have market power and hence it is appropriate that both areregulated.

In the countries referenced by du, the second operator has not beenfound to have significant market power and hence it is correct thatthese operators should not be subject to ex-ante regulatory obligations.However, this is not the case in the UAE where du has been found tohave market power in clearly specified geographic markets. Hence, it isentirely consistent with international good practice that operators foundto have market power in similar markets and with similar rationale forthe market power findings (control of infrastructure), should face largelysimilar ex-ante regulatory obligations.

The UAE has two fixed networks in separate geographical areas, withlittle network overlap. This is quite different from the examplesprovided by du, which include markets where there is an incumbentoperator with a national fixed network and a second operator that hasrolled out a duplicate network across some geographical areas.

A more relevant example in terms of this consultation is the onehighlighted by Etisalat in its initial submission to the TRA. This is thecase of Kingston Communications (KCom) in the UK. KCom has beenfound by the UK regulator to have market power in a specific geographicarea of the UK equal to its network footprint (i.e. the region of EastYorkshire). A range of wholesale and retail remedies have been applied

historically on KCom to address this market power.

The current regulatory obligations are summarised by KCom below:

The Regulator has performed a series of Market Reviews toestablish the state of competition within the communicationssector with the aim of determining how much regulation shouldbe imposed within each market sector. KCOM's East Yorkshire


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operation has been found to have dominance leading to an SMP

determination for it in the "Hull area" for a number of EC definedproduct and service markets.

Some of the consequent additional conditions impose furtherobligations with respect to publication of other documents andinformation regarding the KCOM Group's retail and wholesaleservices and operations.

The documents that are required to be published to comply withthe obligations arising from General, USO and SMP conditions,including reference offers, price lists, interface specificationsand statistical information..17

Historically, KCom has been regulated at both wholesale and retail levelsin a similar manner to BT. Etisalat notes that in its 2009 Market Reviewof Fixed Narrowband Retail markets, Ofcom decided to keep a range ofretail regulations in place on KCom as it found KCom still retainsignificant market power in the fixed market, while removing all of BTsretail regulations in its much larger geographic market (i.e U.K.excluding East Yorkshire).18Hence, it is not always the case (as has beenargued by du) that smaller operators necessarily face a relatively lowerregulatory burden. The appropriate form of regulatory obligations reliescrucially on an assessment of market power of each operator.

Etisalat also disagrees that du should escape from any regulatoryobligations at the retail level on the basis that such regulation is notproportionate. In the same way that KCom (mentioned above) has beenhistorically regulated in the UK (in both the retail and wholesale market)due to a finding of market power in a number of specified markets, sotoo should du. Ex-ante regulations should be applied that are sufficientto address the potential for du to behave in an anti-competitive manner.

In terms of relative size, KCom is around 2% of BTs size in the UK. In theUAE, du is approximately 30% to 40% of Etisalats combined revenues.

Etisalat does not agree that du has significant constraints in its ability totake advantage of its market position. There is strong evidence (as

17See http://www.kcomplc.com/regulatory-information/background/18See Ofcom (2009) Fixed Narrowband Retail Services MarketsIdentification of markets and determination of market power,http://stakeholders.ofcom.org.uk/binaries/consultations/retail_markets/statement/statement.pdf.


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outlined by the TRA in the consultation as well as in Etisalats initial

submission to the TRA) of the significant progress du has made over thelast few years in gaining market share across a range of markets in theUAE. The range of additional wholesale and retail regulations can onlystrengthen its ability to compete in markets where Etisalat has marketpower.

Etisalat reiterates its view (made in its initial submission to the TRA)that in addition to the regulatory obligations proposed by the TRA, dushould also be required to prepare regulatory accounts on a HistoricalCost Accounting (HCA) and Current Cost Accounting (CCA) basis. This isneeded in order for the TRA to adequately verify that prices offered bydu are not set at anti-competitive levels.


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6 Wholesale markets where Etisalat has been foundto have market power (all markets)


du agrees with TRAs proposed remedies on Etisalat. In addition, duargues for the following additional measures:

That the TRA should introduce a sufficiently robust enforcementmechanism to support the implementation of the remedies;19

that the obligation on Etisalat to publish a reference offer (RO)should only apply on a forward looking basis to new services andservices that are still subject to early stages of negotiations betweenthe parties;20

that more granularity is required regarding the elements to beincluded within the RO and the timeline for its development andagreement;21

that the RO needs to be a baseline for negotiations, as opposed to atake-it-or-leave-it commercial offer;22

that the TRA should introduce a sufficiently robust dispute resolution

mechanism (timeframe for decision making, backdating ofdecisions);23

that the TRA should introduce a monitoring regime to detect anyprice and non-price discrimination by Etisalat;24

that Etisalat should be required to submit a report on an annualbasis, using a template determined by the TRA in consultation withthe industry. This report should cover connection times forresidential and business users, as well as times associated with faultdetection, rectification and handling. To encourage appropriatelevels of internal diligence and responsibility, the report should besigned off by Etisalat senior management. To the extent that a

report reveals possible discrimination, Etisalat should be required to

19See dus initial redacted submission to the TRA, p. 5 and pp. 23-27 (section 4.3).20See dus initial redacted submission to the TRA, p. 24 (section 4.3).21See dus initial redacted submission to the TRA. p. 25 (section 4.3).22See dus initial redacted submission to the TRA, p. 25 (section 4.3).23See dus initial redacted submission to the TRA, p. 25-27 (section 4.3).24See dus initial redacted submission to the TRA, pp. 35-39 (section 5.1).


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produce an implementation plan for approval by the TRA that seeks

to address the instances of non-compliance with its non-discrimination obligation;25

The TRA should review the information produced in the report(mentioned above) in order to consider whether the current approachof behavioural remedies remain appropriate or whether morestructural measures, such as functional separation, are necessary tosafeguard the competitive process in the telecoms sector; 26and

Implementation of passive infrastructure access.27

In WM8A and WM8C, du supports the TRAs decision to require Etisalat toestablish additional points of interconnect.

However, du argues that it is necessary for the TRA to develop a Pointsof Interconnect (POI) Policy28setting out at a granular level a process andcriteria in relation to the development and implementation of newpoints of interconnect.29


6.2.1

General comments

As discussed in section 2.2.8 of Etisalats initial submission to the TRA,and based on a forward looking analysis of the market, the TRA shouldreconsider its assessment of competition in WM5. In this market, therapidly changing competitive dynamics as well as the forthcomingintroduction of comprehensive remedies (including mobile numberportability) means that the market should be considered competitive andall ex-ante remedies in this market should be removed. Etisalat notesthat the introduction of Mobile Number Portability is intended to reduceswitching costs in the mobile retail market and increase competition,which, when combined with the high level of competition that alreadyexists in the mobile market, removes the need for specific wholesaleremedies in this market.

National Roaming should be time-limited in order to promote incentives

on du to invest in its network (rather than piggy back on the investments

25See dus initial redacted submission to the TRA, pp. 35-39 (section 5.1).26See dus initial redacted submission to the TRA, pp. 39-41 (section 5.2).27See dus initial redacted submission to the TRA, p. 35 (section 4.5).28See dus initial redacted submission to the TRA, pp. 27-33 (section 4.4).29See dus initial redacted submission to the TRA, pp. 28-33.


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already made by Etisalat). Site sharing should be reciprocal and not

based on an assessment of market power.30

Etisalat notes that large sections of dus submission, particularly section4 covering remedies applicable to wholesale markets, have beenredacted making it impossible for Etisalat and other interested parties tounderstand the reasoning behinds some of dus arguments as well as tofully respond to their views and proposals. While Etisalat accepts theprinciple that redaction of commercially sensitive data may be necessarybefore publication of consultation responses, we do not agree that thelogic of a reasoned argument should also be redacted.

6.2.2

Requirement to produce a Reference Offer

Etisalat agrees with du about the need for more detail on a number ofthe obligations (including the content of the proposed RO and thetimelines for agreement) and made similar points in its initialsubmission. However, Etisalat considers that these issues should besubject to a further consultation by the TRA. Separate consultations onROs are a common practice in other markets. A separate consultationwill allow for the range of practical issues to be given properconsideration by interested parties, such as those raised by du includingtimelines for agreement, whether backdating of regulatory decisions isappropriate and whether a formal enforcement and/or monitoringregime is required).

Etisalat fails to understand why du argues that the RO should only covernew services on a forward looking basis. Etisalat disagrees with thisproposal as a RO should include all the key services provided by anoperator who has market power in a specified market. This will supporttransparency and non-discrimination and the obligation should beapplied to both operators.

Also, Etisalat considers that the TRA should clearly differentiate itsapproach to regulating interconnection compared to other wholesaleaccess services (such as leased lines, cable landing stations, site sharingetc.). Consistent with this view, Etisalat recommends that two forms of

RO are produced: (1) A Reference Interconnection Offer (RIO) and (2) A

30Further detail on Etisalats views on national roaming and site sharing can be found inEtisalats initial submission to the TRA, pp. 62-65 (section 3.4.5).


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Reference Access Offer (RAO). This approach is consistent with that used

in a number of other markets (both in the region31

and worldwide).

6.2.3

Introduction of a monitoring, reporting and enforcementregime

Any ex-ante regulatory obligations including any introduction of newmonitoring and enforcement regimes (as suggested by du) should applyequally to du given that it also has been found to have market power ina number of discrete markets and also has a non-discriminationrequirement. Again, Etisalat considers that if the TRA is minded tointroduce such a regime it should be subject to a separate detailedconsultation to allow industry to provide views.

6.2.4

Introduction of a Point of Interconnection (POI) Policy

Etisalat agrees with du that more detail is needed on what the variousremedies proposed will mean in practice (for example, the requirementon Etisalat to provide additional points of interconnect).

A POI Policy of the like proposed by du may have merit, as a range ofagreed processes and procedures will need to be agreed betweenoperators in order to implement this obligation in practice. For example,Etisalat would see merit in such a policy including pricing principles thatset out which party should pay for the capital expenditure (which can beconsiderable relative to the amount of traffic that may cross the point ofinterconnect in some geographical areas of the UAE) of establishing newpoints of interconnect.

However, these details should not be finalised as part of thisconsultation. Rather, they should be discussed and agreed as part of afurther consultation at a later time. This will allow for properconsideration of the range of issues by all interested stakeholders.

6.2.5

Regulations of cable landing stations (WM8C)

Etisalat strongly disagrees that it should face an ex-ante regulatoryobligation to provide access to its cable landing stations.32Such landing

stations are clearly replicable (evidenced by the landing stations thathave already been established by du in the UAE). The ability to replicatesuch infrastructure severely weakens the underlying rationale for

31For example Saudi Arabias CITC has directed STC to produce both a RIO and a RAO.32See pp. 67-69 of Etisalat initial submission to the TRA for a detailed discussion ofEtisalats views on this issue.


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imposing a regulatory obligation in the first place. If du needs additional

capacity then it has the ability to commercially negotiate with Etisalator any other international operator for such capacity or invest in its owncapacity on its existing cable landing station. As du has at least onelanding station, it does not require access to Etisalats infrastructure tomanage resilience. As such, there is no case to require Etisalat toprovide such capacity as part of an ex-ante regulatory obligation.

6.2.6

Implementation of passive infrastructure access

du proposes that an additional market is defined: the wholesale marketfor physical network infrastructure at a fixed location. Du argues thatfollowing a market assessment that Etisalat would be found to have

market power in this new market and the remedy that should be appliedto address this market power would be provide for access to passiveinfrastructure. Etisalat reiterates its view that defining additionalmarkets at this stage is unnecessary. It also considers that any additionaltypes of remedies to those already proposed by the TRA would bepremature and disproportionate. Before any new type of wholesaleremedy is introduced into the market, the current range of wholesaleremedies (including the comprehensive wholesale Bitstream accessproduct) should be given time to impact on the competitiveness of themarket.

The forthcoming Bitstream access product (which Etisalat and du are

jointly developing) is intended to allow operators to compete forcustomers of other networks and through that increase competition inthe downstream retail market. The introduction of this product has beensubject to considerable investment of time and resources by the industryover the last few years. It should be given time to impact on the marketbefore alternative remedies are considered.

6.2.7

Structural reform options

Functional or structural separation remedies on operators should only beconsidered as a last resort. This is consistent with the approach taken tothe issues by the European Commission. For example, the Commission

has made the following statement:

In exceptional cases, functional separation may be justified as aremedy where there has been persistent failure to achieveeffective non-discrimination in several of the markets concerned,and where there is little or no prospect of infrastructure


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competition within a reasonable time-frame after recourse to

one or more remedies previously considered to be appropriate.33

The wide-ranging and comprehensive wholesale remedies that are beingintroduced in the UAE, including a Bitstream access product that isunprecedented in its scope, should be given a chance to address theperceived market failures identified by the TRA before any additionalremedies are considered.

33European Commission (2009) DIRECTIVE 2009/140/EC OF THE EUROPEAN PARLIAMENTAND OF THE COUNCIL of 25 November 2009 amending Directives 2002/21/EC on acommon regulatory framework for electronic communications networks and services,2002/19/EC on access to, and interconnection of, electronic communications networksand associated facilities, and 2002/20/EC on the authorisation of electroniccommunications networks and services, paragraph 61.


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7 Wholesale markets where du has been found tohave market power (all markets)


du argues that it should face fewer regulatory obligations than currentlyproposed. In particular, du argues that it should not have to prepare aReference Offer (RO) as it considers that it would have to chargereciprocal rates for wholesale prices to those charges by Etisalat.34


Etisalat notes that the current TRA proposals mean that du would facefewer regulatory obligations than Etisalat, so dus proposals wouldfurther widen this asymmetrical treatment of operators that have bothbeen found to have market power in a range of wholesale markets. Thiswould be unfair and discriminatory.

Etisalat does not agree with du that it should escape from a requirementto prepare a RO. Etisalat notes that a RO covers more than just pricingand, given that Etisalat will be keen to negotiate with du to providecompetition in du network areas moving forward, it will be important forEtisalat and other new market players in the future that acomprehensive RO is available from du. Therefore the benefits of an ROalso depend on how many players there are in the market.

Given dus market power in its fixed network areas, it is critical that anynegotiations that Etisalat enters into with du are backed up by arequirement on du to provide a reference offer for its relevant fixedservices. This is consistent with the general principle that operators thathave been found to have market power in similar markets should besubject to equivalent ex-ante regulatory obligations.

Nevertheless, we agree with du that interconnection prices should be

reciprocal between the operators. This is consistent with Etisalats viewsset out in its initial submission that footnote 70 of the TRA consultationregarding interconnection pricing should be revised.35

34See dus initial redacted submission to the TRA, p. 23 (section 4.2).35For details on Etisalats views see p. 48-49 (section 3.4.4) of Etisalats redactedinitial submission to the TRA.


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In addition, and as outlined in Etisalats initial submission, du should be

required to produce regulatory accounts on both a HCA and CCA basis(the arguments made by du on page 37 of the redacted response applyequally to du given that du has market power in a number of wholesaleand retail markets).36This is needed in order for the TRA to have comfortthat the prices offered by du are not set at anti-competitive levels.

36For details on Etisalats views see p. 40-41 (section 3.4.1.1) of Etisalats redactedinitial submission to the TRA.

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Consultation-Etisalat Comments on Reponses 29 Sept 2011

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