Anti-Competitive Practice Triggered by Pro-Competitive Regulation: An Outline of Margin Squeeze in the Liberalized European Telecoms Sector, in the Light of the Deutsche Telekom Decision

Abstract

Liberalization in the telecoms sector in the EU, launched in the late 1980s, implied inter alia an added obligation on the vertically integrated incumbent operator to grant potential entrants wholesale access to the natural monopoly elements of its network. There could thus be seen post liberalization, an unusual escalation in discriminatory practices by telecommunications operators, more so in what is known as ‘margin squeezing’ paralleling the positive results of progressive measures as they created a market structure wherein new entrants who sought to compete with incumbent operators, required, at the same time, access to their upstream inputs. Inevitably thereafter, competition law proceedings in this regard were launched in several Member States of the EU. The need to prevent this pricing practice became pressing also for the NRAs who were regulators of wholesale and retail telecommunications prices. The focus of the present paper, as against this backdrop, shall be on Margin Squeeze, incidences of which were seen in the EU Telecommunications Sector around the time of the advent of the 2002 Regulatory Framework. The paper is divided into two Parts. Part 1 gives a brief overview of the stream of changes ushered in by the liberalization process in the European telecommunications sector, discussing the positions immediately before and after it had begun; and Part 2, which is on the problem of margin squeeze abuses in the sector, consists, in essence, of a study of the issues that arose in the DT case, of the Decision delivered by the Commission, and general observations of the approach adopted by European courts in such cases.