Case C-85/14, KPN – disproportionately profiting from connections made to information helplines [judgment 2015, ECLI:EU:C:2015:610]

Helplines and other public information numbers often lack a telephone number with a regional or geographic area dialling code. Instead, these information lines use ‘non-geographic’ numbers. However, telephoning these non-geographic numbers may be more expensive. Dutch consumers were being ripped off and so the Dutch Consumer and Market Authority introduced a law stipulating that consumers had to be charged roughly the same as if they were telephoning a traditional land-line. But does that rule also apply when a company passes a call from one telecoms company to another telecoms company? And is there any justification for this in the EU’s ‘Access’ Directive 2002/19/EC and the EU’s ‘Universal Service Directive’ 2002/22/EC?

Facts
Before 2013, it was more expensive for consumers in Holland to telephone a whole range of public information numbers that used so-called ‘non-geographic’ numbers rather than  traditional land-line numbers with a geographic area code.

Believing that Dutch consumers were being ripped off by these ‘non-geographic numbers’, the Dutch Consumer and Market Authority (the regulatory body for telecoms, competition and market regulation), issued a Decision whereby the cost of telephoning a non-geographic number had to be comparable with that of telephoning a land-line. The Decision is known as the 2013 ‘interoperability’ Decision.

The Authority believed that the Decision applied to the Dutch national telecoms incumbent, the KPN, and in particular to a type of services known as ‘transit services’. These are behind-the-scenes services used when the KPN makes the connection between a consumer’s telecoms company, and the telecoms company which is operating the number that the consumer is ringing.

The present dispute arose when it became apparent that the KPN was charging more for its ‘transit services’ when calls were being made to non-geographic numbers. The Dutch Consumer and Market Authority thought that in light of its ‘interoperability’ Decision, the KPN should end this differential pricing of transit services. The KPN disagreed with the Dutch Consumer and Market Authority.

The matter went before the appellate administrative law tribunal for commercial disputes involving laws such as competition and telecoms, the Dutch ‘College van Beroep voor het bedrijfsleven’.

Before this appellate tribunal, the KPN submitted in essence that the Authority’s decision simply did not bind the KPN because the interoperability Decision did not cover ‘transit services’. Transit services were not available to members of the public; the KPN’s tariff applied only to the services used to connect telecoms companies. Furthermore, as a matter of public law, the Authority’s Decision was disproportionate and insufficiently reasoned not least because the Decision’s drafting used terms such as ‘comparable’ tariffs and ‘necessary costs’ – terms so woolly that the principle of legal certainty was infringed. And as a matter of EU law, under the new EU framework Directive, price control could only be imposed on a company once a market analysis had demonstrated that that company enjoyed ‘significant market power’ and no such investigation had been undertaken.

The KPN’s submissions were countered by the Dutch Consumer and Market Authority. The Authority relied on the EU’s ‘USD’: the EU’s Universal Service Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services.

In the USD, Article 28 has a provision specifically dealing with access to numbers and services, and it provides:

1. Member States shall ensure that, where technically and economically feasible, and except where a called subscriber has chosen for commercial reasons to limit access by calling parties located in specific geographical areas, relevant national authorities take all necessary steps to ensure that end-users are able to:
(a) access and use services using non-geographic numbers within the Community; and
(b) access all numbers provided in the Community, regardless of the technology and devices used by the operator, including those in the national numbering plans of Member States, those from the ETNS and Universal International Freephone Numbers (UIFN).

2. Member States shall ensure that the relevant authorities are able to require undertakings providing public communications networks and/or publicly available electronic communications services to block, on a case-by-case basis, access to numbers or services where this is justified by reasons of fraud or misuse and to require that in such cases providers of electronic communications services withhold relevant interconnection or other service revenues.

The Authority interpreted the wording of Article 28 USD to mean that they were allowed to take measures to remove the barriers associated with accessing non-geographic numbers, including barriers such as higher tariffs.

To support its case still further, the Authority pointed out that the wording of the interoperability Decision made it clear that the rule applied to all traffic passing over a network, including traffic transported over a transit network. And as to whether the terms of the Decision were vague, that was not correct: the word ‘necessary’ had been introduced because this made plain that companies could charge a higher tariff but only circumstances where there was an additional cost arising directly from the fact that a call was being made to a non-geographic number.

The appellate tribunal had to decide whether any application of the Authority’s interoperability Decision to transit services was in accordance with EU law and a raft of EU Directives.

The first issue was what to make of Article 28(1)(a) USD. The provision allows Member States to take ‘all necessary steps’ to ensure that end-users are able to access and use services using non-geographic numbers. But did higher prices for ‘transit services’ really represent a barrier to using a non-geographic number? The appellate tribunal doubted this. Not only did the wording to Recital 46 to Directive 2009/136 (amending the USD), suggest that the purpose of Article 28 was to ensure cross-border telephone traffic, but the cost of KPN’s transit service was also but a tiny fraction of the price paid by the consumer.

The second issue of concern was how to interpret Article 13(1) of the Access Directive 2002/19/EC. The provision deals with ‘Price control and cost accounting obligations’, and states:

A national regulatory authority may, in accordance with the provisions of Article 8, impose obligations relating to cost recovery and price controls, including obligations for cost orientation of prices and obligations concerning cost accounting systems, for the provision of specific types of interconnection and/or access, in situations where a market analysis indicates that a lack of effective competition means that the operator concerned may sustain prices at an excessively high level, or may apply a price squeeze, to the detriment of end-users. To encourage investments by the operator, including in next generation networks, national regulatory authorities shall take into account the investment made by the operator, and allow him a reasonable rate of return on adequate capital employed, taking into account any risks specific to a particular new investment network project.

The appellate tribunal took this provision to mean that price control could only be imposed after a market analysis had been undertaken. The particular problem in the present case was how to interpret that provision when it was read together with the more expansive Article 28 USD, which expressly allowed regulatory authorities to take all ‘necessary’ measures.

Given the lack of clarity as to what these provisions of EU legislation meant, the three members of the appellate tribunal decided to make a reference to the CJEU.

Questions Referred
My unofficial translation of the questions asked by the Dutch ‘College van Beroep voor het bedrijfsleven’ reads:

1. Does Article 28 of the USD permit the imposition of price control without a market analysis having shown that a party with a regulated service has significant market power, when the cross border option of non-geographic telephone numbers is by itself technologically possible and the only barrier to accessing these numbers arises from the tariffs which are charged and which make calling a non-geographic number more expensive than a call to a geographic number?

2. If Question 1 is answered in the affirmative, then the following two questions occur to the College van Beroep voor het bedrijfsleven:
a) Does the competence to control prices apply even when the influence of the higher tariff exerts only a limited influence on the volume of calls made to non-geographic numbers?

b) Given the aims of the measure concerned, to what extent does the national court still have the possibility to determine whether a necessary pricing measure pursuant to Article 28 USD is not unreasonably onerous on the transit supplier?

3. Does Article 28(1) USD still leave open the possibility that the measures mentioned in that provision can be imposed by a body other than the national regulatory authority which has the competence to do so under Article 13(1) of the Access Directive where that latter authority only has powers of enforcement?