C.T.L.R., 1999, N-30
1. Januar 1999


According to sec 41 of the Austrian Telecommunications Act ("TKG"), operators of public telecommunications networks are obligated to offer interconnection to other network operators on demand. If no agreement on interconnection can be reached within six weeks, the regulatory authority (Telekom Control Kommission) may be called upon. The regulatory authority´s decision will subsequently govern the relationship between the interconnecting parties. In a proceeding pursuant to section 41 of the TKG, the regulatory authority assumes an arbitral function with certain discretionary powers in order to achieve an equitable consideration of mutual interests with a view to contractual equivalence. However, in issuing an interconnection order, the regulatory authority also has to consider a range of public interests beyond those of the parties seeking interconnection, such as the interests of customers (variety of services, benefit of innovative market offers, protection of universal service) or competitors (safeguarding of homogeneous access agreements, enhancement of competition). Thus, the (at times difficult) task of the regulatory authority is to achieve an overall balanced market situation - a role well in excess of that of a mere arbitrator.
In addition, Telekom Control GmbH is to watch over possible abuses of dominant positions (TKG, s 34) in order to protect competition in the telecom market. The refusal of the dominant operator to grant interconnection to competitors is a prime example of such an abuse.

In 1998, the Austrian Regulators had ample opportunity to apply both types of the above procedures to the numerous interconnection disputes accompanied the market entry of alternative network operators following full liberalization. The following is an analysis of the legal implications of the most significant of around 12 proceedings instituted by alternative operators against the incumbent Austrian telecom operator, Telekom Austria ("TA") and decided by the Regulators in the course of 1998. Most of the decisions are currently under review by the Austrian Supreme Constitutional Court following appeals by TA.

a. Interconnection Fees Order (9 March 1998, Z 1/97)

Following unsuccessful negotiations, a number of alternative network operators called on Telekom-Control-Kommission to determine interconnection fees terminating and transiting traffic.

When deciding on interconnection fees, the Regulatory Authority has discretionary powers as an arbitrator which are set within the frame of provisions under European law (TKG, s 41, para 3) making reference to the relevant EC-directives on interconnection). In accordance with Article 7 para 2 of the Interconnection Directive (97/33), the last sentence of section 41, paragraph 3 of the TKG requires interconnection fees charged by dominant operators to be based on the principle of cost orientation. Thus, in determining the interconnection fees, the Regulatory Authority applied the FL-LRAIC-principle recommended by the EC Commission (Commission Recommendation of 8 January 1998; 98/195) and reflected in the Austrian Interconnection Ordinance (sec 8 para 2 in connection with sec 9 para 3).
In the absence of the incumbent operator´s cost accounting system, the regulatory authority determined the interconnection fees based on an expert opinion and in line with the "best current practice" of interconnection charges in the EU as included in the Commission Recommendation of 8 January 1998. On this basis, interconnection fees were determined (as flat fees independent of day time and traffic volume) to be ATS 0.25/min (single tandem) and ATS 0.33/min (double tandem), respectively, for terminating calls and ATS 0.053/min (single transit) and ATS 0.104/min (double transit), respectively, for transiting calls. The fees thus determined entered into effect retroactively by 1 January 1998 and will remain in force until 31 December 1999, the parties being obligated to enter into negotiations on new fees by 30 September 1999.
To the surprise of the applicants, the Regulatory Authority stated that the interconnection fees thus determined would apply on a reciprocal basis (except for mobile network operators) since the termination of calls in the alternative network would cost TA the same as the termination of calls in the TA-network would cost the alternative operators. As a result, the cost-orientation basis for fees means that alternative operators can charge their interconnection partner lower tariffs.
Other issues dealt with in the decision are the requirement to offer a second-by-second billing of interconnection fees, the prohibition against charging call set-up charges for non-completed calls as well as the prohibition against charging competitors access deficit costs.

Since dominant operators are bound by the principle on non-discrimination (sec 34 TKG), these rates have to be offered to all network operators requesting similar interconnection services from the incumbent operator.

TA challenged the regulatory authority´s decree in the Supreme Constitutional Court (the proceeding is still pending), because (among other reasons) of the absence of a clear cut statutory provision providing for the authority´s competence to decide on the matter in question. In order to avoid any discussion on this issue in the future, sec 111 TKG has meanwhile been amended so as to include in the authority´s competence also the determination of conditions for interconnection in case of dispute according to secs 37 to 41 TKG (Federal Gazette BGBl I 27/1999).

b. Decree on the Abuse of a Dominant Position (3 August 1998; RWBR 001/98 and RWBR 002/98)

In June 1998, two alternative operators called on Telecom Control GmbH to rule that TA was abusing its dominant position by refusing to grant them full interconnection even though it had been given to other telecom operators. In particular, the operators moved for being offered interconnection fees independent of day-time and traffic volume (as per the above interconnection decree, dated 9 March 1998); access to ISDN services and special services numbers.
TA argued that such a request for interconnection could not be the subject of a proceeding according to sec 34 TKG (abuse of a dominant position) but only of the special proceeding according to sec 41 TKG (with the Regulator acting as an arbitrator); furthermore, Telekom Control GmbH allegedly lacked competence under the TKG to deal with this interconnection matter in the light of the fact that interconnection issues are to be dealt with by Telekom Control Kommission. This is especially since most of these issues relate to "civil rights" which are not to be treated by Telekom Control GmbH as a simple administrative authority.

In refuting TA´s line of argument, Telekom Control GmbH held that TA, in refusing interconnection terms to the applicants as to other operators, had engaged in a discriminatory behaviour prohibited by section 34 para 1 TKG and ordered TA to offer to the applicants similar interconnection agreements, especially with respect to interconnection fees as determined in the decree of 9 March 1998 (see above).

c. Decrees on Full Interconnection (5 and 29 October 1999; Z 1/98, Z 3/98, Z 4/98 and Z 5/98)

In the wake of the Regulatory Authority´s decision on interconnection fees, TA issued a new standard interconnection offer. However, was not formally approved by the regulator. The offer was limited to interconnection in the area of 3.1 kHz voice telephony, access to carriers (transit network operators) was offered only in the form of the "second dial tone"-method (which means waiting for another tone after having selected a carrier on a call-by-call basis) and interconnection on lower network hierarchy levels as well as certain services (e.g., "free-phone" services) had to be agreed by separate agreement.
When several alternative network operators requested full interconnection from TA (including interconnection on all network hierarchy levels, originating transit and carrier selection, non-tariff services, ISDN-services and emergency call services), TA took the view that most of the requested elements could not be considered as issues of interconnection. This meant that the requirements under the TKG for the dominant operator to offer and negotiate interconnection would not apply; nor would the regulatory authority´s arbitral function.

The Regulatory Authority did not share TA´s view and held that interconnection is a special form of network access which - unlike other forms of network access - is not limited to mere access to the functions of another telecommunication network and services rendered on the basis thereon. Rather aims at enabling customers connected to the other telecommunications network to communicate with each other either directly or indirectly. This functional definition requires the presence of telecommunications infrastructure of the interconnecting (alternative) operator and the use of such infrastructure for the rendering of (public) telecommunication services.

On the basis of this definition, the Regulatory Authority held as follows:
(i) TA´s view that interconnection only relates to 3.1 kHz voice telephony is too narrow. "Communication" must be understood to have a broader application, covering data services and ISDN-features (64 kbit/s unrestricted). Since non-tariff services and emergency calls constitute voice telephony, they are a form of communication and therefore subject to the interconnection regime.
(ii) TA is obligated to offer access to the applicants to its telecommunications network and unbundled parts thereof, including ISDN services, emergency calls and free phone services (since TA publicly offers these services to end customers at its network termination points).
(iii) Equally, TA is obligated to offer access to carriers. Reference to direct or indirect communication makes clear that carrier selection is a matter of interconnection (and not simply a service offered by the incumbent operator to certain other operators, as argued by TA, which would therefore not constitute a matter of interconnection). The Regulator also determined interconnection fees to be applied in this context.
(iv) As concerns network access at lower network hierarchy levels, the Regulatory Authority held that if such access is sought in order to enable or enhance communication between customers of different network operators, it is a matter of interconnection (TA had tried to argue that interconnection is limited to access at the main switch level). At the same time, though network access at these levels constitutes a form of access to unbundled network components (TKG, section 37, para 1) - which must be granted by a dominant operator such as TA -, such access can be denied if the dominant operator gives objective reasons why such access is not justified.
(v) Furthermore, the regulatory authority held that since all of the above matters constitute interconnection, the principle of cost orientation applies to respective interconnection fees (sec 41 para 3 TKG, Section 8 Interconnection Ordinance in implementation of Article 7 para " Directive 97/33/EC);
(vi) By 30 June 1999, TA is obligated to make available to its opponents the single stage-dialling method (no second dialling tone) for establishing a connection via another carrier.


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