28 June 2002
The FCA has examined the potential competition restraints in the broadband service market. Problems occurred particularly in the wholesale markets. To remind all telecom operators of the claims of competition legislation, the FCA has delivered a statement to the telecom operators providing ISDN or broadband services in Finland.
Broadband connections exploit the ADSL technology and are faster than the digital ISDN telephone network. By using the broadband network, companies can e.g. connect several offices to one another; such services are used e.g. in telecommuting solutions. In households, broadband is used primarily for Internet access. There are approx. 100’000 ADSL subscriptions in Finland.
There are both wholesale and retail markets for broadband Internet services. Consumers and private firms purchase Internet access from a service operator, which forms the retail market for broadband services. To access the Internet, the service operator obtains network capacity from the network operator. This forms the wholesale market of broadband services.
Network services are sold by telecom companies, who have a legal obligation to rent network access also to outside service providers. Competition concerns arise due to the dominant position of local telecom operators: they own the local fixed network and are thus able to govern their competitors access to the telecom networks. At the same time, telephone companies themselves act as competitors of service providers in the retail market.
In its report, the FCA found that the major problems in the wholesale markets involve pricing. Telecom companies do not necessarily have a public price list for the operator product and the pricing of the service may be discriminatory or otherwise unreasonable to competing service operators. The delivery terms of services may also contain conditions unduly restricting the operating freedom of competitors.
The report showed that competition on the broadband market mainly functions well. This may, however, vary according to region, as may the prices of the services. There are usually several retail service providers in the city but in sparsely populated areas, local telecom companies often have a regional monopoly on the retail level, too, i.e. in the sales of ADSL connections to consumers and corporate customers. The competition restraints on the retail level are mainly related to the bundling of products. The Internet service, access to the service via the network and the necessary equipment are sold together and separate prices for them have not been specified. It is also not always possible for the customer to purchase product and services separately.
The FCA finds that, in the future, it is important that, both on the wholesale and retail level, customers obtaining broadband services have available a sufficient number of alternative services, service providers and the equipment needed to use the services. Even if legislation provides a good basis for sound competition with the forthcoming communications market act, attention should be paid to the pricing models, terms of delivery and operating modes used by incumbent operators. Should the FCA discover restrictive practices in the broadband market in the future, it shall take the necessary action.
The FCA commenced its investigation of the broadband market after having received several contacts from consumers and companies in which it was proposed that accessibility and pricing problems occur in the broadband data access market and these would give reason to doubt that competition was being restrained.
Senior Research Officer Timo Mattila
Research Officer Lauri Nousiainen