Poland: EC has stressed that fixed termination rates should be fixed at costs

[ec] The national telecoms regulator of Poland, Prezes Urzędu Komunikacji Elektronicznej
(UKE), has carried out its second round of telecoms market analysis and intends to modify
remedies for regulating fixed-line termination services of the largest incumbent operator,
Telekomunikacja Polska SA (TP). Termination services are the wholesale services which
fixed-line operators provide to other operators – fixed or mobile – for connecting incoming
calls on their networks.

In its draft measure UKE suggests, among other things, to modify the price control remedy for
termination rates (the wholesale prices which operators charge for terminating calls on their
respective networks) so that these charges would be based on the actual costs incurred by the
incumbent operator. In its first analysis UKE proposed to base charge control on the
incremental cost (LRIC) model. However, this methodology was never implemented and
UKE considers that costing methodology based on cost incurred is easier to implement.
UKE's proposal does not change currently charged termination rates, but sets out a
methodology for any future changes.

The fixed termination rates currently charged by TP were approved by UKE on 8 April 2008
and range from 0.0137 PLN (approx. 0.3 eurocents) to 0.0478 PLN (approx. 1.1 eurocents).

The Commission stressed that termination rates should be set at the cost which would be
faced by an efficient operator providing the relevant service. The methodology chosen by
UKE (i.e. charges based on costs incurred) does not appear to promote efficiency and should
therefore be considered only as a temporary measure. The Commission invited UKE to
review its analysis as soon as the Recommendation on the regulatory treatment of fixed and
mobile termination rates applies.

The Commission also reminded UKE that when considering a change to current termination
charges, the Polish telecoms regulator is required to notify the European Commission and the
national regulatory authorities of other Member States of the measures it takes. Should there
be failure to conduct a community consultation of the draft measures covering relevant details
of the planned regulatory remedies, such as specific termination rates, the Commission will
consider launching infringement proceedings against Poland.

Under EU law, the national telecoms regulator of Poland is required to take utmost account of
the Commission's comments. In particular, the Commission expects UKE to specify clearly
that the currently proposed charge control mechanism is of a temporary nature and that UKE
commits to notify its counterparts in Member States and the Commission of all decisions
changing termination charges in the future.

Telecoms: Commission comments on Polish telecoms regulator's plans to change way of calculating future fixedline termination rates