Case C-556/12, TDC – proportionate duties on a national incumbent for access to its fibre-optic network [judgment 2014, ECLI:EU:C:2014:2009]

Are the obligations to provide access to a fibre-optic network proportionate where this involves the telecommunications company having to lay drop-cables from distribution points in its network so that rival companies can start to reach the homes of new customers?

Facts
TDC is a giant Danish telecoms company. For years, TDC and its previous corporate incarnations have run not only a copper access network that spans the length and breadth of Denmark but also Denmark’s largest cable-TV network. As Denmark’s former national incumbent, it has been deemed to enjoy ‘significant market power’ by the former Danish IT and Telecom Agency, known variously as the ‘IT- og Telestyrelse’, or the NITA.

Redressing some of the competition law issues arising from TDC’s position in the market, the NITA imposed a number of obligations on TDC. These were based on Danish legislation that implemented Article 8 and 12 of the EC’s Directive 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities.

One of the obligations was that TDC had to grant every reasonable request from rival companies for access to its copper and cable-TV networks. In this way, branches could be made in these networks, and rival companies could reach the homes of new end-customers.

In 2009, TDC bought another telecoms network company, DONG Energy. The purchase had the effect of extending the scope of TDC’s fibre-optic network in Denmark by five and half thousand kilometres. It gained a transport ‘core’ network of eight hundred kilometres. The purchase also gave it a further 15 000 customers. Geographically, the former DONG Energy network was primarily centred on a part of Denmark’s capital city, Copenhagen, and Northern and Eastern Zealand.

Purchasing DONG Energy did however give rise to a fresh regulatory issue. Could the existing access obligations to TDC’s cable and copper networks apply by analogy to TDC’s fibre-optic network? In 2010, the NITA decided that TDC could be so obliged. The NITA’s decision related to ‘Market 5′: the market for wholesale access to broadband. NITA’s decision took as its starting the observation that TDC supplied broadband connections via its copper network and its cable-TV network, which was the largest in the country. According to the NITA, TDC had no economic incentive to build parallel infrastructures in a particular area. TDC would only have an incentive to upgrade the copper network in areas where TDC could not use its cable-TV network. Therefore, NITA believed that other wholesale customers would not be able to compete with TDC for the high speed segment of the market or indeed offer services that required the higher speeds. This gave TDC a competitive advantage that reinforced its market position. As a result, the NITA obliged TDC to provide small, necessary adjustments, for example laying drop cables to ‘homes passed’ and bury these cables for a distance of up to 30 metres between the distribution point in an access network, and the ‘terminating segment’, which is at the premises of an end-user.

In 2011, NITA’s decision was appealed to the Teleklagenævn. TDC was not successful. For whereas the Teleklagenævn recognised there was no obligation on TDC to provide new infrastructure, this did not apply where existing fibre-optic infrastructure had been laid and was operational – thus the only missing link in the chain was that to the end-user. The obligation on TDC to allow access to its fibre-optic network and to lay drop cables over a specific distance was thus a proportionate measure designed to ensure real competition.

The matter was litigated further to the Østre Landsret. Amongst several submissions, TDC pointed out the cost involved with laying drop cables from distribution points in a fibre-optic network is one of the most expensive costs with fibre-optic networks. Further, the NITA based its decision in the context of Market 5 whereas it should have considered this in the context of Market 4 for the wholesale access to network infrastructure. To boot, no market analysis had been undertaken. Without the requisite and appropriate information, the ultimate decision of the appellate body lacked a proper legal footing.

TDC acknowledged that a National Regulatory Authority such as NITA could impose access obligations on companies with significant market power by dint of Article 12 read together with Articles 2 and 8 but that was not the case here. The access obligation did not concern ‘specific elements of a network and the associated facilities’ because TDC first had to lay them, and to do so at considerable expense. Equally, the Directive made no distinction between infrastructure and ‘actual new infrastructure’. And comparable companies with significant market power in other Member States were not under similar  obligations. Furthermore, when it came to the costs that TDC was running up to lay these drop cables TDC submitted that although it was able to recover the costs of installing the drop cables through an imposed price control obligation, it was in no way certain that the total cost of the drop cables would be recovered – this all depended on how long the drop cables would last and whether they would in fact be used by customers.

Questions Referred
According to the Curia website, the Danish court has asked:

1. Does the definition of ‘access’ in Article 2(a) of the Access Directive  cover access in the form of the installation of drop cables between the distribution point in an access network and the terminating segment at the end-user’s premises? Does it make a difference in answering the question that the maximum length of such drop cables is 30 metres?
2. Is the installation of a drop cable over a distance of up to 30 metres between the distribution point in an access network and the terminating segment at the end user’s premises covered by the phrase ‘access to, and use of, specific network elements and associated facilities’ in Article 12 of the Access Directive, ref. Article 2 and Article 8?
3. Is it relevant for the answer to question 1 and question 2, where the access obligation takes the form of a requirement, for example, to install drop cables between the distribution point in an access network and the terminating segment at an end-user’s premises, that the owner of an electronic communications network must undertake investment which considerably exceeds the acquisition cost of the electronic communications network to which access must be provided?
4. Is it relevant for the answer to question 3 that the owner is able to recover the costs of installing the drop cables through an imposed price control obligation?