MARKET ANALYSIS OF WHOLESALE (PHYSICAL) NETWORK INFRASTRUCTURE

Croatian Post and Electronic Communications Agency

Jurišićeva 13

10000 Zagreb

July 2009

MARKET ANALYSIS OF WHOLESALE

(PHYSICAL) NETWORK

INFRASTRUCTURE ACCESS

(INCLUDING SHARED OR FULLY

UNBUNDLED ACCESS) AT A FIXED

LOCATION

HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a

Fixed Location July 2009

2

1. Executive Summary .....................................................................................................4

2. Introduction .................................................................................................................6 2.1. European Regulatory Framework for Electronic Communications ..............................6

2.2. Electronic Communications Act..................................................................................7

2.3. Chronology of activities..............................................................................................9

3. Identification of the Relevant Market.......................................................................11

4. Definition of a Relevant Market................................................................................12 4.1. Relevant market in the dimension of services............................................................12

4.1.1. Retail market of broadband Internet access ....................................................13

4.1.2. Demand-side substitution- retail level ............................................................13

4.1.2.1. xDSL access over twisted-pair copper wire ...........................................14

4.1.2.1.1 ADSL access over twisted-pair copper wire .........................................14

4.1.2.1.1 VDSL access over twisted-pair copper wire .........................................17

4.1.2.2. Access over mobile networks ................................................................18

4.1.2.3. Fixed wireless access.............................................................................21

4.1.2.3.1 Fixed wireless access over the Homebox service..................................21

4.1.2.3.2 Fixed wireless access over the WiMAX technology.............................22

4.1.2.3.3 Fixed wireless access over the HotSpot service....................................23

4.1.2.4. Access over cable networks ...................................................................23

4.1.2.5. Access over leased lines ........................................................................25

4.1.2.6. Access over optical fibre .......................................................................25

4.1.2.7. Conclusion ............................................................................................26

4.1.3. Demand-side substitution – wholesale level ...................................................26

4.1.3.1. Service of unbundled access to the local loop based on advanced

technical solutions in the access network as a substitute service for the

service of unbundled access to the copper-based local loop ...................28

4.1.3.1.1 Service of unbundled access to the local loop based on FttCab solution29

4.1.3.1.2 Service of unbundled access to the local loop based on FttH solution...31

4.1.3.2. Bitstream service as a substitute service for the service of unbundled

access to the local loop ..........................................................................34

4.1.3.3. Building own infrastructure as a substitute service for the service of

unbundled access to the local loop.........................................................36

4.1.3.4. Broadband Internet access service for self-supply as a substitute service

for the service of unbundled access to the local loop..............................36

4.1.4. Supply-side substitution.................................................................................38

4.1.5. Collocation service ........................................................................................38

4.1.6. Conclusion on the relevant market in the dimension of services.....................39

4.2. Relevant market in the geographical dimension.........................................................40

4.3. Opinion of the competent regulatory authority on the definition of the relevant market

.................................................................................................................................40

5. Objective and Subject of Market Analysis ...............................................................41 5.1. Market share of an operator on the relevant market ...................................................41

5.2. Control of infrastructure in case of significant problems for infrastructure competition

.................................................................................................................................43

5.3. Economies of scale ...................................................................................................44

5.4. Economies of scope ..................................................................................................44

5.5. Lack of countervailing buying power ........................................................................45

5.6. Level of vertical integration ......................................................................................45

5.7. Conclusion on the assessment of the existence of operators with significant market

power and the evaluation of effectiveness of competition .........................................46



3

6. Competition Problems ...............................................................................................47 6.1. Market dimension of competition problems ..............................................................48

6.1.1. Vertical leveraging ........................................................................................48

6.1.2. Horizontal leveraging ....................................................................................48

6.1.3. Single market dominance...............................................................................49

6.1.4. Call termination.............................................................................................49

6.2. Cause-and-effect type of dimension of competition problems....................................49

6.3. Overview of competition problems recognised in the European practice ...................50

6.4. Competition problems on the market of wholesale network infrastructure access

(including shared or fully unbundled access) at a fixed location................................51

6.4.1. Refusal to deal/denial of access......................................................................52

6.4.2. Leveraging by means of non-price variables ..................................................54

6.4.2.1. Discriminatory use or withholding of information .................................54

6.4.2.2. Delaying tactics.....................................................................................54

6.4.2.3. Undue requirements ..............................................................................55

6.4.2.4. Undue use of information about competitors..........................................56

6.4.2.5. Quality discrimination ...........................................................................56

6.4.2.6. Other types of discrimination currently defined in the Annex to the

Reference Offer for the service of unbundled access to the local loop....57

6.4.3. Leveraging by means of pricing.....................................................................57

6.4.3.1. Price discrimination...............................................................................57

6.4.3.2. Cross subsidisation ................................................................................59

7. Regulatory Obligations of the SMP Operator ..........................................................60 7.1. Regulatory obligations imposed on the SMP operator on the market of wholesale

(physical) network infrastructure access (including shared or fully unbundled access)

at a fixed location .....................................................................................................60

7.1.1. Obligation of access to, and use of, specific network facilities .......................61

7.1.2. Obligation of non-discrimination ...................................................................73

7.1.3. Obligation of transparency.............................................................................75

7.1.4. Price control and cost accounting obligation ..................................................81

7.1.5. Obligation of accounting separation...............................................................92

7.1.6. Other regulatory obligations that might be imposed by the Agency on the

market of wholesale (physical) network infrastructure access (including shared

or fully unbundled access) at a fixed location, pursuant to ECA.....................95

8. Annexes ...........................................................................................................................96 8.1 . Annex A – Opinion of the Croatian Competition Agency........................................96

8.2 Annex B – Comments on the market of wholesale (physical) network infrastructure

access (including shared or fully unbundled access) at a fixed location and the

Agency’s reply to the delivered comments................................................................98

8.2.1 Answers to comments made by HT-Hrvatske telekomunikacije d.d. ..............98

8.2.2 Answers to VIPnet’s comments ...................................................................131

8.2.3 Answers to comments made by H1 Telekom ...............................................136

8.2.4 Answers to comments made by OT-Optima Telekom ..................................143

8.2.5 The Agency’s comments..............................................................................150



4

1. Executive Summary

The European directives have been implemented into Croatian legislation through the

Electronic Communications Act1 which entered into force on 1 July 2008. The Electronic

Communications Act, among other things, lays down conditions for the provision of

electronic communications networks and services. Through the application of the provisions

of this Act, the Agency2 creates conditions for efficient competition, that is, it allows all

operators active in electronic communications markets to do their business under equal

conditions.

While carrying out the market analysis procedure provided for in Article 52 of the ECA, the

Agency paid particular attention to apply the relevant European Commission

Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation3 and the relevant

European Commission guidelines on market analysis and assessment of significant market

power under the Community regulatory framework for electronic communications networks

and services4.

The main objective of the market analysis procedure is to establish the existence of efficient

competition in a certain market or whether there are one or more operators on that market

with single or joint significant market power. The results of the analysis will serve to impose,

alter, maintain or withdraw regulatory obligations laid down in Article 58 to 65 of the ECA.

Pursuant to Article 53, paragraph 1 of the ECA, the Agency has established the market of

wholesale (physical) network infrastructure access (including shared or fully unbundled

access) at a fixed location as a relevant market susceptible to ex-ante regulation. The

mentioned market is a part of the relevant European Commission Recommendation on

Relevant Markets Susceptible to Ex-Ante Regulation, which means that the European

Commission concluded that the three criteria referred to in Article 53, paragraph 2 of the ECA

have been cumulatively met in the relevant market.

The identification of the relevant market is a basis for market analysis which consists of the

definition of the relevant market and the assessment of the existence of one or more operators

with significant market power on this market followed by the imposition of regulatory

obligations on operators with significant market power.

The purpose of the process of the definition of a relevant market is to identify restrictions, that

is, problems faced by electronic communications networks operators on a certain market. In

the process of the definition of a relevant market, that is, of market boundaries, the Agency

has defined the dimension of services and the geographical dimension of the relevant market

and on the basis of the results of the conducted analysis it identified the above-mentioned

relevant market.

On the basis of the conducted analysis, the Agency has concluded that the relevant wholesale

broadband access market comprises the following:

1 Electronic Communications Act (OG 73/08)

2 Croatian Post and Electronic Communications Agency (HAKOM) 3 OJ L 344/65; 28 December 2007

4 OJ C 165/6; 11/7/ 2002



5

On the basis of the conducted analysis, the Agency has concluded that the relevant wholesale

(physical) network infrastructure access (including shared or fully unbundled access) at a

fixed location comprises the following services:

• Service of fully unbundled access to the copper-based local loop and the copper-based local sub-loop which enables the operator to use the entire frequency spectrum

of the local loop,

• Service of shared unbundled access to the copper-based local loop and the copper-based local sub-loop enables the operator to use only the non-voice band of

the frequency spectrum of the unbundled local loop or the local sub-loop (twisted

copper pair), while the voice band of frequency spectrum of the local loop or the local

sub-loop is still used by HT to provide publicly available telephone service,

• Service of unbundled access to the fibre local loop by means of point to point link,

• Service of access to network infrastructure provided by HT for self-supply regardless of whether access technology is based on twisted copper pair, a hybrid

solution including both twisted copper pair and optical fibre, or on the basis of optical

fibre;

• Collocation service, which includes physical, distant and virtual location.

The Agency has also determined that the relevant market of wholesale (physical) network

infrastructure access (including shared or fully unbundled access) at a fixed location in the

geographical dimension is the national territory of the Republic of Croatia.

After having identified the relevant market, the Agency has, on the basis of criteria necessary

for the assessment of significant market power of operators as laid down in Article 55,

paragraph 5 of the ECA, established the following:

• HT d.d. is an operator with significant market power on the market of wholesale

(physical) network infrastructure access (including shared or fully unbundled access)

at a fixed location.

After having identified HT as the operator with significant market power, the Agency has

imposed on HT as the SMP operator the following regulatory obligations in view of problems

that may appear in the market of wholesale (physical) network infrastructure access

(including shared or fully unbundled access) at a fixed location and in the downstream retail

market onto which the operator with significant market power may leverage its significant

market power:

• Obligation of access to, and use of, specific network facilities;

• Obligation of non-discrimination;

• Obligation of transparency and the obligation to publish the reference offer for the

service of unbundled access to the local loop and related facilities;

• Price control and cost-accounting obligations;

• Obligation of accounting separation.

Pursuant to Article 54, paragraph 5 of the ECA, the Agency asked for an opinion of the

Croatian Competition Agency on the manner in which the Agency has defined the relevant

market and designated the operator with significant market power on that market. The opinion

is enclosed to this document in Chapter 8.1 “Annex A” of this document.



6

2. Introduction

2.1. European Regulatory Framework for Electronic Communications

In March 2002, the European Commission adopted four directives representing the 2002

Regulatory Framework for Electronic Communications Networks and Services, and the fifth

directive, which also represents the Regulatory Framework, was adopted in October 2002.

The previously mentioned directives are the following:

• Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002

on access to, and interconnection of, electronic communications networks and

associated facilities (Access Directive)

• Directive 2002/20/EC of the European Parliament and of the Council of 7 March

2002 on the authorisation of electronic communications networks and services

(Authorisation Directive)


on a common regulatory framework for electronic communications networks and

services (Framework Directive)


on universal service and users' rights relating to electronic communications networks

and services (Universal Service Directive)

• Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002

concerning the processing of personal data and the protection of privacy in the

electronic communications sector (Directive on privacy and electronic

communications)

The intention of the European Commission directives is to promote harmonisation in the field

of electronic communications in all Member States of the European Union.

On the basis of the first paragraph of Article 15 of the Framework Directive (Directive

2002/21/EC), the European Commission adopted the following:

• Recommendation 2003/311/EC of 11 February 2003 on relevant product and service

markets within the electronic communications sector susceptible to ex ante

regulation5, which was in force until December 2007 when it was replaced by

• Recommendation 2007/879/EC of 17 December 2007 on relevant product and service

markets within the electronic communications sector susceptible to ex ante regulation.

The relevant Recommendation from February 2003 recognised 18 markets susceptible to ex

ante regulation meaning that the European Commission concluded that three criteria were

cumulatively met in the relevant markets (The Three Criteria Test), and it thus concluded that

the relevant markets were susceptible to ex-ante regulation in the majority of the European

5 OJ L 114/45; 08/05/ 2003



7

Union Member States. The previous Recommendation on relevant markets was amended in

such a manner that the new Recommendation on relevant markets recognises 7 relevant

markets susceptible to ex ante regulation instead of the previous 18. Markets which are no

longer a constituent part of the Recommendation on relevant markets may still be regulated

by national regulatory authorities provided that they prove that the three criteria have been

cumulatively met on these markets (The Three Criteria Test).

The intention of the Recommendation on relevant markets is to promote harmonisation in the

electronic communications sector by making equivalent products and services subject to

market analysis in all Member States of the European Union. However, national regulatory

authorities of Member States are authorised to determine on their own that certain markets,

different from those on the list of markets in the valid Recommendation, are susceptible to ex

ante regulation, depending on the situation in each individual country provided that they

prove that three criteria have been cumulatively met in these markets (The Three Criteria

Test).

2.2. Electronic Communications Act

The previously mentioned directives have been implemented into Croatian legislation through

the ECA which, among other things, lays down the conditions for the provision of electronic

communications networks and services. By applying the provisions of ECA, the Agency

ensures conditions for efficient competition, that is, it allows all operators active in electronic

communications markets to operate under equal conditions.

While carrying out the market analysis procedure provided for in Article 52 of the ECA, the

Agency paid particular attention to apply the relevant European Commission

Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation and the relevant

European Commission guidelines on market analysis and assessment of significant market

power under the Community regulatory framework for electronic communications networks

and services.

The main objective of the market analysis procedure is to establish the existence of efficient

competition in a certain market or whether there are one or more operators on that market

having single or joint significant market power. The results of the analysis or the Three

Criteria Test will serve to impose, alter, maintain or withdraw regulatory obligations laid

down in Articles 58 to 65 of the ECA.

The 2002 Regulatory Framework which has been implemented in the European Union

Member States and in Croatian legislation through the ECA, provides for a three-step market

analysis procedure:

1. The first step refers to the process of identification of relevant markets susceptible to ex

ante regulation pursuant to Article 53 of the ECA.

Pursuant to the first paragraph of Article 15 of the Framework Directive (Directive

2002/21/EC), the European Commission adopted Recommendation 2003/311/EC of 11

February 2003 on relevant product and service markets within the electronic

communications sector susceptible to ex ante regulation. The mentioned relevant

Recommendation recognised 18 markets susceptible to ex ante regulation meaning that

the European Commission concluded that three criteria were cumulatively met on the



8

relevant markets (The Three Criteria Test), and it thus concluded that the relevant markets

were susceptible to ex-ante regulation in the majority of the European Union Member

States.

On the basis of the new Recommendation of 17 December 2007 on relevant products and

service markets within the electronic communications sector susceptible to ex ante

regulation, the previous Recommendation was amended in such a manner instead of 18 it

recognises 7 relevant markets susceptible to ex ante regulation. Markets which are no

longer a constituent part of the Recommendation on relevant markets may still be

regulated by national regulatory authorities provided that they prove that the three criteria

have been cumulatively met in these markets (The Three Criteria Test).

The Electronic Communications Act entered into force in the Republic of Croatia on 1

July 2008, and Article 52, paragraph 4 of the ECA reads that the Agency shall, when

carrying out the procedures for identification of relevant markets susceptible to ex ante

regulation, take particular account of the application of the relevant Commission’s

Recommendation on relevant markets. Since the relevant Recommendation on relevant

markets in force is the one which entered into force on 28 December 2007 and which

recognises 7 markets susceptible to ex-ante regulation, the Agency may, without proving

the cumulative satisfaction of the three criteria (the Three Criteria Test), carry out ex ante

regulation only in these 7 markets.

At the same time, in accordance with Article 53, paragraph 2 of the ECA, the Agency may

adopt a decision establishing that other relevant markets, in addition to relevant markets

referred to in the European Commission recommendation, are susceptible to ex ante

regulation provided that the following three criteria have been cumulatively met in these

markets:

1. the presence of high and non-transitory market entry barriers of structural, legal or

regulatory nature;

2. market structure which does not aim towards the development of effective competition

within a certain time framework;

3. the application of relevant competition legislation alone does not make possible the

elimination of market entry failures concerned.

However, if all three criteria referred to in Article 53, paragraph 2 of the ECA have been

cumulatively satisfied, the Agency may carry out ex ante regulation of the remaining 11

markets that formed a constituent part of the old Recommendation on relevant markets.

The Agency also may also, provided that all three criteria referred to in Article 53,

paragraph 2 of the ECA have been cumulatively satisfied, regulate markets following

from the Telecommunications Act6 or any other markets which are specific for the

electronic communications networks and services sector in the Republic of Croatia but do

not follow from the old Recommendation on relevant markets or the Telecommunications

Act.

The market of „Wholesale (physical) network infrastructure access (including shared or

fully unbundled access) at a fixed location“, which is the subject of this document, was

6 The Telecommunications Act which was in force in the Republic of Croatia until 1 July 2008, and was based

on the 1998 Regulatory Framework. The mentioned Act recognised 4 relevant markets: interconnection market,

leased-lines market, fixed public telephone networks services market and market of public voice service in

mobile telecommunications networks.



9

the 11th

of the 18 relevant markets mentioned in the old Recommendation on relevant

markets. In the new Recommendation on relevant markets the market in question in the 4th

of the 7 relevant markets mentioned in this Recommendation. In accordance with the

above, this market is still susceptible to ex ante regulation and the Agency may carry out

ex ante regulation of this market and thus identify the relevant market in question without

proving that the three criteria referred to in Article 53, paragraph 2 of the ECA have been

cumulatively met.

2. In the second step the Agency carries out a market analysis consisting of the definition

of the relevant market and the assessment of the existence of a single or multiple

operators with significant market power on that relevant market in order to assess the

effectiveness of competition on that relevant market pursuant to Article 54 of the ECA and

Article 55 of the ECA.

In order to establish the relevant market pursuant to Article 54 of the ECA, the Agency

shall determine the dimension of services and the geographical market dimension taking

into account the relevant European Commission Guidelines on market analysis and the

assessment of significant market power under the Community regulatory framework for

electronic communications networks and services and the relevant European Union acquis

communautaire in the competition protection sector.

After having identified the relevant market, the Agency shall, in cooperation with the

Croatian Competition Agency, asses the effectiveness of competition on that market.

After having assessed the efficiency of competition in this market, the Agency will, if

there is no effective competition and pursuant to Article 55 of the ECA, assess whether

there is, on this market, an operator with significant market power or operators with

significant market power.

If, on the basis of market analysis, the Agency establishes that there is no effective

competition on the relevant market, it shall, as part of the third step, adopt a decision

pursuant to Article 56 of the ECA on the designation of operators with significant market

power on that relevant market. By this decision the Agency will impose at least one

regulatory obligation referred to in Articles 58 to 65 of the ECA to every operator.

2.3. Chronology of activities

After the entry into force of the ECA on 1 July 2008, the Agency’s Council, on its session

held on 9 July 2008 adopted a decision7 determining operators who are obliged to submit all

data necessary for the definition and analysis of the market of wholesale (physical) network

infrastructure access (including shared or fully unbundled access) at a fixed location.

In the above-mentioned decision, the Agency’s Council determined that the following

operator is obliged to submit all necessary data:

• HT-Hrvatske telekomunikacije d.d., Savska cesta 32, 10000 Zagreb

7 Class: UP/I-344-01/08-01/1584; Reg. No. 376-11-08-01



10

In order to collect all the necessary data, the Agency prepared, on the basis of its own

assumptions and experiences from European Union Member States, a special questionnaire

for the market of wholesale (physical) network infrastructure access (including shared or fully

unbundled access) at a fixed location. The Agency prepared the questionnaire in such a

manner that it tried to cover all the peculiarities of the market in question while also taking

into account the best European practice. In order to get a quality questionnaire, the Agency

included HT in the preparation of the questionnaire at the meeting held on 3 July 2008. Data

requested in the above-mentioned questionnaire refer to the time period comprising the

second half of 2005, the whole of 2006 and 2007, and the first half of 2008.

In accordance with the decision of the Agency’s Council of 9 July 2008, the Agency sent the

questionnaire to HT on 16 July 2008. HT was asked to complete and return the questionnaire

to the Agency, both in written and electronic form, by 19 September 2008. HT returned the

completed questionnaire on 6 October 2008 after having asked the extension of the deadline

by an official letter of 18 September 2008.

Upon receipt of the questionnaire, the Agency initiated a detailed analysis of the relevant

market of wholesale (physical) network infrastructure access (including shared or fully

unbundled access) at a fixed location. Furthermore, after the receipt and the analysis of the

submitted data, bearing in mind the importance of the initiated procedure, and in order to

eliminate all possible ambiguities related to the submitted data, the Agency sent a memo on

13 November 20088 asking HT for additional clarifications and/or data which have not been

submitted but are important for further analysis of the relevant market. The set deadline was

28 November 2008.

The Agency took into account the delivered additional clarifications and/or data which had

not been delivered before and continued with the detailed analysis of the relevant market of


access) at a fixed location.

For the purposes of analysis of this relevant market, the Agency also used data from the

questionnaire for broadband Internet access market.

8 Class: UP/I-344-01/08-01/1585; Reg.No: 376-11-08-25



11

3. Identification of the Relevant Market

The Croatian Post and Electronic Communications Agency is a national regulatory agency

carrying out regulatory and other tasks within the scope and competences laid down in the

Electronic Communications Act. Among other things, the Agency is competent for

competition in electronic communications, and, pursuant to Article 53, paragraphs 1 and 2 of

the ECA it adopts a decision identifying relevant markets susceptible to ex ante regulation.

On the basis of Article 53, paragraph 1 of the ECA, the Agency identifies relevant markets

susceptible to ex ante regulation while taking into account the relevant European Commission

Recommendation mentioned in Article 54, paragraph 4 of the ECA.

At the same time, in accordance with Article 53, paragraph 2 of the ECA, the Agency may

adopt a decision establishing that other relevant markets, in addition to relevant markets

referred to in the European Commission Recommendation, are susceptible to ex ante

regulation provided that the following three criteria have been cumulatively met in these

markets:

1. the presence of high and non-transitory market entry barriers of structural, legal or

regulatory nature;

2. market structure which does not aim towards the development of effective competition

within a certain time framework;

3. the application of relevant competition legislation alone does not make possible the

elimination of market entry failures concerned.

Pursuant to Article 53, paragraph 1 of the ECA, the Agency’s Council adopted a decision 9

identifying a relevant market of:

• Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location

10.

The mentioned market is a part of the recommendation in force, which means that the

European Commission concluded that the mentioned three criteria have been cumulatively

satisfied in the relevant market and thus established that the relevant market is susceptible to

ex ante regulation in the majority of EU Member States.

The identification of the relevant market is a basis for market analysis which consists in the

definition of the relevant market, the assessment of the existence of single or multiple

operators with significant market power in that market and the imposition of regulatory

obligations on SMP operators, which is described in detail in the following chapters.

9 Decision on relevant markets susceptible to ex ante regulation (Class: UP/I-344-01/08-01/1582; Reg. No: 376-

11-08-01) 10

Market No. 4 from the Annex to the European Commission Recommendation on relevant markets susceptible

to ex ante regulation



12

4. Definition of a Relevant Market

In order to define a relevant market, the Agency determines a dimension of services and a

geographical dimension of the relevant market taking into account the relevant European

Commission Guidelines on market analysis and the assessment of significant market power

and the relevant acquis communautaire in the competition sector.

According to the European Commission Guidelines, the assessment of behaviour of operators

on the market requires the taking into account of demand-side substitution and supply-side

substitution. In addition to the mentioned competition problems, it is necessary to assess the

existence of potential competition as well. The difference between potential competition and

supply-side substitution lies in the fact that supply-side substitution responds promptly to a

price increase whereas potential competitors may need more time before starting to supply the

market with the equivalent service. Furthermore, supply substitution involves no additional

significant costs whereas potential entry occurs at significant sunk costs11

.

Demand-side substitutability is used to establish services which are regarded as substitutes by

consumers whereas supply-side substitutability indicates the readiness of suppliers in the

immediate to short term offer the equivalent service without incurring significant additional

costs.

One possible way of assessing the existence of any demand and supply-side substitution is to

apply the so-called ‘hypothetical monopolist test12

. This test is used to study what would

happen in case of a small but significant, lasting increase in the price of a given product or

service, assuming that the prices of all other products or services remain constant whereby a

permanent price increase of between 5 and 10% is taken into account.

4.1. Relevant market in the dimension of services

Neither the Recommendation which is now in force nor the former one recognised the retail

broadband Internet market as a market susceptible to ex ante regulation. The European

Commission feels that efficient regulation at wholesale level may ensure competition at the

retail level.

However, since the demand for the service of wholesale (physical) network infrastructure

access (including shared or fully unbundled access) at a fixed location the Agency believed it

would be appropriate when determining the dimension of services of the relevant market of


access) at a fixed location to define substitute services at the wholesale market by studying the

ways in which operators at the retail market provide the service of broadband internet access

to end users whilst taking into account future market development

.

For the purpose of providing broadband Internet access services at the retail level, operators

either have their own infrastructure or use wholesale services of other operators to ensure

access to the end user.

11

eng. sunk costs 12

SSNIP test – eng. small but significant non transitory increase in price



13

4.1.1. Retail market of broadband Internet access

According to the data collected in questionnaires in which, for the purposes of this analysis,

speed over144 kbit/s13

is regarded as broadband access speed, the end user in the Republic of

Croatia has access to broadband Internet in the following ways:

• xDSL access over a twisted-pair copper wire14

,

• access over mobile networks (EDGE, UMTS, HSDPA),

• fixed wireless access (Homebox, WiMAX, Wi-Fi Hot-Spots),

• cable networks access (CTV),

• access over leased-lines (different from xDSL access over twisted-pair copper wire,

fixed wireless access and optical fibres, and

• access over optical fibre (FttH).

Figure 1 End-users of broadband Internet access services according to way of access

Source: Questionnaires for wholesale broadband access market

According to the submitted data, ADSL access over twisted pair copper wire15

is a broadband

Internet access service with the greatest penetration and the share of 77.93%. It is followed by

access over mobile networks, fixed wireless access, and broadband Internet access over cable

networks, with the share of other technologies amounting to around 1% (Figure1).

4.1.2. Demand-side substitution- retail level

13

In accordance with the definition of the Communication Committee– a committee assisting European

Commission in the execution of its authorities on the basis of the 2002 Regulatory Framework 14 ADSL, ADSL2, ADSL2+, VDSL, VDSL2 15

For the purposes of this document, unless specified otherwise, ADSL access over twisted pair copper wire

shall mean access based on ADSL, ADSL2 and ADSL2+ technologies.

77.93%

14.66%

2.70% 1.11% 3.60%

ADSL access over copper wire Access over mobile networks

Fixed wireless access Cable access

Other technologies



14

Demand-side substitution implies the determination of services regarded by users as substitute

services. The Agency is of the opinion that the starting point for the establishment of services

that may be regarded as substitute services should be the service with greatest penetration.

Since services with the greatest penetration at the retail level of broadband Internet access are

services based on ADSL access over twisted-pair copper wire, the Agency aims at

determining whether there are at the retail level any services that could substitute ADSL

access over twisted-pair copper wire. Substitute services are those services to which

consumers could easily switch in case of a hypothetical price increase and thus satisfy their

equivalent need.

4.1.2.1. xDSL access over twisted-pair copper wire

4.1.2.1.1 ADSL access over twisted-pair copper wire

ADSL access over twisted-pair copper wire makes possible the downstream data transfer at a

higher speed and upstream data transfer at a lower speed, and it is adequate for high-speed

data transfer and access to related facilities whereby the transfer speed depends on the length

and type of the twisted- pair. ADSL technology at the retail level is more adequate for the use

of Internet and multimedia services requiring more speed towards the user and less speed in

the other direction.

The majority of twisted copper pairs in the Republic of Croatia are owned by the HT, which is

the incumbent and the owner of the public electronic communications network with

1.735.38616

active twisted copper pairs. The geographical accessibility/distribution is very

wide due to the fact that HT, as the universal service operator, must provide access to its

network to all users17

. HT’s access network was built during a long period of time while HT

was a public undertaking and a part of HPT18

and later while it enjoyed exclusive rights to this

network.

Broadband Internet access services based on ADSL access over twisted-pair copper wire are

supplied to end users by other operators as well, in the first place through HT’s wholesale

services in which case twisted-pair copper wire remains in HT’s ownership. The number of

users to whom they provide broadband Internet access via ADSL technology by means of

direct connection to their own network is negligible.

HT’s wholesale services used by other operators to provide broadband Internet access

services to its end users are the service of unbundled access to the local loop on one hand, and

on the other, the ADSL transport service and bitstream19

access.

What follows from the above-mentioned is that those end users in the Republic of Croatia

who access broadband Internet by means of ADSL access over twisted-pair copper wire may

be the users of the following:

16

Out of the total of 3,613,213 twisted-pairs in the access network. 17

In those parts of the republic of Croatia where there is no access infrastructure via twisted-pair copper wire,

the access to universal service is provided via fixed wireless access. (FGSM). 18

Croatian Post and Telecommunications 19

A service for which the operator uses the ADSL access service along with the ADSL transport service.



15

• Other operators by means of the service of unbundled access to the local loop,

• Other operators by means of ADSL transport service, that is, the bitstream access

service, and

• Other operators by means of direct connection to that operator’s network20

.

Figure 2 End-users of broadband Internet access by means of ADSL access over twisted-pair copper wire

according to way of access


The majority of end users who access broadband Internet by means of ADSL access over

twisted-pair copper wire, namely 85.51% of them, are HT’s users (Figure 2).

During the time period covered by questionnaires HT offered in its tariff packages three

classes of access speeds among which the one with greatest penetration is the basic access

speed of 2 Mbit/s (Figure 3). A monthly fee for the basic download access speed in the entire

time period amounted to HRK 79.00 (excluding VAT).

20

In that case twisted-pair copper wire is not owned by HT.

86.51%

10.08% 0.17%3.24%

ADSL for self-supply - HTADSL via unbundled access to the local loopADSL transport and bitstreamADSL for self-supply - othersi



16

Figure 3 Classification of HT’s end users depending on access speed included in the tariff package

Source: Questionnaire for wholesale broadband access market –HT

Along with every access speed, HT offers to the end user a certain amount of traffic, that is,

data transfer. During the entire time period covered by questionnaires, HT offered the basic

data traffic package including 1 GB of traffic and unlimited traffic package, while the amount

of traffic included in the Super package changed over time21

. Table 1 shows the overview of

monthly fees for traffic within tariff packages currently offered by HT:

Table 1 Monthly fee for traffic within HT’s tariff packages

Name of package Price in HRK (VAT included)

MAXadsl Start 1GB 20.00

MAXadsl Super 59.00

Flat 99.00

Source: Questionnaire for wholesale broadband access market –HT

As it may be seen from Figure 4, HT’s end users most frequently use basic packages which

include 1 GB of traffic. However, with the increase in the selection of contents and needs of

end users and a reduction in the amount of the monthly fee for unlimited tariff packages,

together with the unaltered monthly fee for basic packages, in the last three time periods

covered by questionnaires the share of end users of the basic package has decreased with a

consequential increase in the share of users of unlimited tariff packages.

21

Super package included 2GB until 2006/2, 5 GB until 2008/1, and 10 GB in 2008/1.

90.58%

9.42%

92.49%

7.51%

94.32%

5.68%

95.10%

4.90%

95.56%

4.44%

95.91%

4.09%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005/2 2006/1 2006/2 2007/1 2007/2 2008/1

Other speed

Basic speed



17

Figure 4 Classification of HT’s end users depending on the traffic included in the tariff package


Note: * Start package includes 1GB of traffic.

** Super package included 2 GB until 2006/2, 5 GB until 2008/1 5 GB, and 10 GB in 2008/1.

In addition to the ADSL access over twisted-pair copper wire, HT also offers the service of

interactive television called MAXtv, which had 92,205 users at the end of the third quarter

of22

of 2008.

.

4.1.2.1.1 VDSL access over twisted-pair copper wire23

The increase in the selection of contents requiring broadband Internet access and the

increasing demand for the service of IP television led to the increase in the need of users for

more capacity, i.e. faster transfer speed of broadband Internet access. For that reason, ADSL

access over twisted-pair copper wire might prove to be insufifcient in situations requiring

simultaneous transmission of voice telephony, interactive video and high-speed data services

between end users and the main distribution frame.

By shortening the twisted copper pair, i.e., the cable with twisted pairs, in the manner that it is

replaced by an optical cable from the MDF to street cabinets or other concentration point in

the fixed electronic communications network and by installing DSLAM24

(Digital subscriber

line access multiplexer) in the street cabinet or some other concentration point, an operator

uses VDSL technology, in particular VDSL225

technology, to offer to end users quicker

22

T-HT- Results of the first nine months of 2008. 23

For the purposes of this document, unless indicated otherwise, DSL access over twisted-pair copper wire shall

include access on the basis of VDSL and VDSL2 technologies. 24 Digital subscriber line access multiplexer 25

VDSL2 is a symmetrical transfer technology supporting transfer speed from the theoretical 100 Mbit/s in both

directions, depending on the length and quality of the twisted-pair copper wire

79.87%

9.10%

11.03%

86.39%

9.88%

3.74%

79,42%

13.47%

7.10%

79.57%

13.60%

6.82%

77.87%

12.48%

9.65%

72.33%

15.11%

12.56%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005/2 2006/1 2006/2 2007/1 2007/2 2008/1

MAXadsl Flat

MAXadsl Super **

MAXadsl Start*



18

transfer of data at shorter distances compared to data transfer based on ADSL technology.

VDSL2 was in the first place intended for the transfer of multi-channel HDTV (High

Definition Television), video on demand and videoconferences, and for Voice over the

Internet Protocol (VoIP). Therefore, VDSL2 is a good solution for triple play services26

.

Moreover, the Agency thinks that VDSL access over twisted-pair copper wire represents an

adequate substitute service for ADSL access over twisted-pair copper wire, that is, that the

users are likely, in case of a hypothetical increase in the price of the service based on ADSL

technology, to substitute this service with the service based on VDSL technology. In other

words, services based on VDSL technology will be substitutable with the already existing

services based on ADSL technology because this would satisfy the need of users for more

quality, faster and innovative services.

Consequently, the Agency believes that broadband Internet access services based on VDSL

access over twisted-pair copper wire will have a significant influence on competition at the

retail level. In other words, the mentioned services will be substitutable with broadband

Internet access services based on ADSL access over twisted-pair copper wire because this

would satisfy the need of users for more quality, faster and innovative services.

.

As a result, in the part of the analysis referring to wholesale demand-side substitution, the

Agency will take into account the influence of new generation access networks on the existing

wholesale services or, in this case, on the regulated wholesale service of unbundled access to

the local sub-loop over twisted-pair copper wire.

4.1.2.2. Access over mobile networks

Broadband Internet access over mobile networks has become the manner of Internet access

with greatest penetration after ADSL access over twisted-pair copper wire with a share of

14.66%.

The end user connects to the Internet via mobile networks by using a data card or a data

modem. The primary feature of broadband Internet access over mobile networks, which is

based on EDGE, UMTS and HSDPA technologies, is that the user is not exclusively tied to a

certain fixed location but may access Internet on his mobile phone or laptop from any

location, depending on the geographical coverage with EDGE, UMTS, or HSDPA signal.

EDGE technology makes possible the transfer of data up to 220 kbit/s, and UMTS technology

up to 384 kbit/s, which is significantly lower than access speeds offered by ADSL access over

twisted-pair copper wire. On the other hand, HDSPA technology allows transfer of data from

1.8 to 3.6 Mbit/s27

, which makes it comparable to ADSL Internet access technology in terms

of access speed. However, the speed with which the user accesses Internet via mobile

networks depends on the quality of signal reception (level or reception signal), that is, on the

closeness of the base station of the mobile operator and the number of users who are

accessing Internet at the same time, which may result in lower access speed and poorer

quality of service. In the usage of broadband data transfer via mobile technologies voice has

absolute priority over other services. This means that in case of network overload with voice

26

A service comprising broadband Internet access, IP television, and VoIP. 27

Theoretically up to 7,2 Mbit/s.



19

calls (voice traffic), the fall in access speed is inevitable. Another restrictive factor in

broadband Internet access over mobile networks is population coverage with HSDPA signal

which amounts to 60% for all mobile network operators. It is therefore not possible in the

entire territory of the Republic of Croatia to achieve access over mobile networks at access

speed supported by HSDPA technology, which is comparable to access speed supported by

ADSL technology.

Because of the feature of mobility, the user is prepared to pay a higher price for the service of

broadband Internet access over mobile networks. More precisely, the monthly fee in mobile

tariff packages including 1GB of traffic 1 GB28

ranges from HRK 125.00 to 200,00 (see table

2), while the monthly fee for the equivalent tariff packages for ADSL access over twisted –

pair copper wire amounts to HRK 99.0029

.

Table 1 Internet access over mobile networks

Operator Name of package Price in HRK

(VAT included)

T-Mobile Mobile Internet 500 MB 100.00

T-Mobile Mobile Internet 1 GB 200.00


VIP net Mobile Broadband 512 GB 91.00



VIP net Mobile Broadband Flat * 391.00

Tele2 Mobile Broadband 0 MB ** 0.00

Tele2 Mobile Broadband 500 MB 65.00

Tele2 Mobile Broadband 1 GB 125.00


Table 2 Internet access over mobile networks

Operator Name of package Price in HRK

(VAT included)

T-Mobile Mobile Internet 500 MB 100.00






28 Broadband Internet access users mostly use packages including 1 GB of traffic. 29

The mentioned price refers to HT's tariff package within which access speed amounts to 2 Mbit/s, with

included 1 GB of traffic.



20

VIP net Mobile Broadband Flat * 391.00

Tele2 Mobile Broadband 0 MB ** 0.00

Tele2 Mobile Broadband 500 MB 65.00



Source: official websites of operators T-Mobile, Vipnet and Tele2

Note: All subscribers of mobile Internet are charged a fee for the use of the radio frequency amounting to

HRK 10.00 per month.

* includes 10 GB of traffic

** does not include data transfer, charges per MB

Furthermore, any additional data transfer, that is, additional traffic30

, in mobile tariff

packages is charged per MB, ranging from 0.20 to 0.28 HRK/MB. Thus, the charge for an

additional GB of traffic in tariff packages based on access over mobile networks ranges from

HRK 204.80 to 286.72, while in tariff packages offered on the basis of ADSL access over

twisted-pair copper wire it amounts to HRK 20.0031

.

What follows from the above is that, if we take into account the retail price of mobile Internet

access services and Internet access services via ADSL access over twisted-pair copper wire,

in particular the fee for additional traffic, the hypothetic monopolist test shows that mobile

Internet access is not a substitute service of ADSL access over twisted-pair copper wire since

the increase in retail prices of tariff packages based on ADSL access over twisted-pair copper

wire between 5 and 10% will not influence the decision of end users to substitute the letter

service with the broadband Internet access service via mobile networks.

Furthermore, as opposed to tariff packages for ADSL access over twisted-pair copper wire,

the user of broadband Internet access over mobile network does not have the possibility to

choose a package with unlimited traffic32

. Considering the increasing share of users of basic

packages which include 1 GB and the increasing share of users of unlimited tariff packages

(Figure 4), the Agency does not consider the service of broadband Internet access over mobile

networks as a substitute service for ADSL access over twisted-pair copper wire.

Additionally, users of services of mobile Internet access are mostly corporate users who

appreciate mobility in the first place, as opposed to ADSL access over twisted-pair copper

wire which is primarily used by private users. Figure 5 shows the shares of private and

corporate users using broadband Internet access service over mobile networks from one of the

mobile operators. Precisely because of the fact that the majority of users of the above-

mentioned service are corporate users, and with the assumption that the above-mentioned

service is primarily needed for the purpose of mobility, it may be concluded that this service

does not represent a substitute service but a complementary service to services based on

ADSL access over twisted-pair copper wire.

30

Dana transfer, that is, traffic not included in the tariff package. 31 The price for additional GB of traffic within HT's tariff packages. 32

Although VIPnet does offer a tariff package Mobile Broadband Flat, this package does not include unlimited

traffic but 10 GB of traffic.



21

Figure 5 Share of private and corporate users using broadband Internet access service over mobile

networks *


Note: * data from one of the mobile operators

As a result, the Agency is of the opinion that, considering its price and functional

characteristics, mobile Internet access does not represent a substitute service for ADSL access

over twisted-pair copper wire, and that these services will not be regarded as substitutable

services in the time period covered by this analysis. However, considering the increase in the

share of mobile Internet access in the total number of broadband Internet access users, the

Agency shall follow further development of the mentioned service and its influence on

broadband Internet access market.

4.1.2.3. Fixed wireless access

Fixed wireless access is achieved in the Republic of Croatia through the Homebox33

service,

WiMAX technology and the HotSpot service.The share of end users of broadband Internet

access service based on fixed wireless access is only 3.60%. From among the mentioned

services, Homebox service supplied by VIPnet has the largest number of users.

4.1.2.3.1 Fixed wireless access over the Homebox service

Homebox is a fixed wireless access service in the mobile electronic communications network

with the use of the radio-frequency spectrum. The mentioned service is based on EDGE,

UMTS and HSDPA technologies, and in areas covered by the HSDPA signal it enables

broadband Internet access with speed up to 1,8 Mbit/s, and in other areas with speed permitted

by UMTS and EDGE technologies. However, as it was already mentioned in relation to

mobile Internet access, access speed depends on the proximity of the base station of a mobile

network operator and the number of users accessing Internet at the same time, which may

result in lower access speed and poorer quality of service.

33

For the purposes of this document, the Homebox service shall include the Officebox service for corporate

users.

37.61%

62.39%

Corporate users Private users



22

Since the highest access speed allowing data transfer within the Homebox service is lower

even than the lowest access speed in tariff packages offered by HT, who has the biggest

number of end users, the Agency does not consider the Homebox service to be a substitute

service for ADSL access over twisted-pair copper wire. Furthermore, operators offer different

access speed within tariff packages based on ADSL access over twisted-pair copper wire,

while the user of the Homebox service who wants to increase access speed is limited with a

predetermined highest access speed up to 1.8 Mbit/s, which also depends on the coverage

with HSDPA signal.

A monthly fee for the Homebox service is HRK 150.00, and includes access to publicly

available telephone service, Internet access and 2 GB of traffic. Every additional data transfer

in tariff packages over mobile networks is charged HRK 0.20 per MB, that is, an additional

GB of traffic within the Homebox service amounts to HRK 204.80, while the same amount of

traffic in tariff packages offered on the basis of ADSL access over twisted-pair copper wire

amounts to HRK 20.00.

As opposed to tariff packages based on ADSL access over twisted-pair copper wire, the user

of the Homebox service may not chose another tariff package in terms of the amount of traffic

included in the monthly fee, except for the included 2 GB of traffic, not even the unlimited

tariff package. Taking into account the fact that the share of users of basic packages which

include 1 GB of traffic is decreasing, while the share of users of unlimited traffic packages is

increasing (see Figure 4), the Agency does not regard the Homebox services as a substitute

service for ADSL access over twisted-pair copper wire.

If one compares the monthly fee for the Homebox service and prices offered by HT for ADSL

access over twisted-pair copper wire and takes into account the monthly fee for the service of

access to a publicly available telephone service, a monthly fee for Internet access and Internet

traffic of 2 GB for which a user currently pays to HT the total price of HRK 192.20, the

hypothetical monopolist test might suggest that the mentioned services could be regarded as

substitute services. However, in case of the Homebox service, an additional GB of traffic,

which is not included in the tariff package for Homebox service, amounts to HRK 204.80. On

the other hand, in tariff packages offered on the basis of ADSL access over twisted-pair

copper wire, the additional GB amounts to HRK 20.00.

What follows from the above is that the Agency does not regard fixed wireless access over the

Homebox service and the service of ADSL access over twisted-pair copper wire as

substitutable services regardless of the fact that, in terms of the amount of the basic fee, the

Homebox service does represent a substitutable service for the HT’s service offered by means

of ADSL access over twisted-pair copper wire. However, if we take into account the price of

additional traffic, the two services may not be regarded as substitutable services. Therefore,

considering both the functional and price-related characteristics, and taking into account the

additional traffic and the share of users using the Homebox service, the Agency thinks that the

two services may not be regarded as substitute services in the time period covered by this

analysis. Nevertheless, the Agency shall follow further development of the mentioned service

and its influence on broadband Internet access market.

4.1.2.3.2 Fixed wireless access over the WiMAX technology



23

In late 2008 51 concessions for fixed wireless access over WiMAX technology34

were granted

in the Republic of Croatia. They were granted in all Croatian counties to the total of 8

operators. The only companies providing broadband Internet access over WiMAX technology

in certain counties are Novi-Net d.o.o., Optima Telekom d.d., and WiMAX Telecom d.o.o.

since the second half of 2008.

In the time periods covered by the questionnaire the number of end users of broadband

Internet access over WiMAX technology was negligible. The main reasons for the lack of

users of this technology in the provision of broadband Internet access are the lack of

standards, expensive terminal equipment and insufficient quality

Furthermore, some operators gave up the granted concessions35

. One operator mentions

problems encountered during implementation of the electronic communications system and

during commercial provision of the service. The problems were related to the usage of the

procured and installed equipment as well as to the fact that the service was not accepted on

the market, and the price of terminal equipment was too high. Since the mentioned reasons do

not allow the operator to provide the service in question on the basis of a long-term cost-

effective commercial model, the operator submitted a written request for the withdrawal of

the granted concessions.

As a result of the above, the Agency does not regard the mentioned technology to be a

substitute service for ADSL access over twisted-pair copper wire. Nevertheless, the Agency

shall observe the influence of the service in question on broadband Internet access market.

4.1.2.3.3 Fixed wireless access over the HotSpot service

The HotSpot service as a solution for wireless Internet access based on WLAN technology

may not be regarded as a substitute service because its price cannot compete with the price of

ADSL access over twisted-pair copper wire. For instance, T-Mobile measures Internet access

over the above-mentioned services in 15 minute intervals, and charges every interval at a

price of HRK 10.00. In other words, the service of Internet access over the Hot Spot service is

charged on the basis of duration, and not on the amount of transferred data as in the case of

broadband Internet access service based on ADSL access over twisted-pair copper wire.

HotSpot service also allows access at precisely designated locations such as city squares,

marinas, hotels and airports and it is not intended for usage in households and companies

which is why it does not represent a substitute for the service of ADSL access over twisted-

pair copper wire.

.

4.1.2.4. Access over cable networks

Access over cable networks is broadband Internet access allowing the user to connect by

using a coaxial cable (or over a hybrid fibre-coaxial network) which at the same time

broadcasts the cable television signal. Although the primary intention of the cable network is

to provide television contents, today, an increasing number of operators may, by means of

34

Some are for the territory of one county, and some for the territories of two or more neigthbouring counties. 35

Three operators gave up the total of 20 concessions.



24

certain technical alterations on the networks, offer to their end users a publicly available

telephone service and data transfer.

Broadband Internet access over cable networks allows data transfer at an approximately

identical speed as ADSL access over twisted-pair copper wire. Internet access over cable

networks functions on the principle of bandwidth sharing. Cable modems are linked by

coaxial cables to the cable modem termination system (CMTS) which is a constituent part of

the CATV – local exchange of a cable network operator. Although this type of architecture

allows the broadcasting of the cable television signal to a large group of end users with a

relatively small number of cables, when using cable modems to access Internet, all users

linked with CMTS by means of a joint coaxial cable share the total transfer speed. In other

words, all users from the same or several neighbouring buildings share the same cable

connecting them to the central node and thus share the same frequency segment (bandwidth)

used by the cable modem. The result of this is that an individual user may not achieve

maximum speed at a certain moment or that transfer rate falls as a result of excessive overload

of the cable network.

The share of end users of broadband Internet access over cable networks in the Republic of

Croatia amounted 2.70% at the end of the first half of 2008.

The biggest cable operator B.net offers in a tariff package, which also includes publicly

available telephone service and Internet access of 2 Mbit/s for a price of HRK 159.00, the

possibility of unlimited Internet traffic and unlimited calls to all national fixed networks.

When comparing this package to a similar package offered by HT by means of the ADSL

access over twisted-pair copper wire, we have to take into account the monthly fee for the

service of access to the publicly available telephone service, a monthly fee for Internet access,

and unlimited Internet traffic for which the end user currently pays the price of HRK 251.20.

.

Table 3. B.net – tariff packages

Name of package Speed Price in HRK (VAT included)

Mistral Light 1024/128 94.00

Mistral 2048/384 145.00

Scirocco 3072/512 225.00

Bora 6144/768 303.00

Typhoon 16384/1024 434.00

2Mps,FLAT RATE+Xtel FLAT RATE 2048/256 kbps 159.00

Source:B.net’s official website

Note: All packages include unlimited Internet traffic

Furthermore, users of B.net-a may, at a price of HRK 145.00 and download access speed of 2

Mbit/s, use unlimited Internet traffic, while HT users have to pay HRK 178.00 for the same

package and an additional monthly fee for access to a publicly available telephone service.

The Agency thinks that the operator supplying broadband Internet accesses via ADSL access

over twisted-pair copper wire may not profit by increasing the prices of its services between 5

and 10% because the user will turn to cable networks for broadband Internet access, provided

that they are available.



25

Also, since prices of both technologies used for Internet access are similar, access over cable

exerts a certain price-related pressure at the retail level against retail prices of ADSL access

over twisted-pair copper wire. What follows from the above is that access over cable

networks, considering its characteristics in terms of price and functionality, represents a

substitute service for ADSL access over twisted-pair copper wire at the retail market of

broadband Internet access.

4.1.2.5. Access over leased lines

Broadband access line is intended for business entities and big companies whose business

communication is based on the need for constant Internet presence and for high-speed transfer

of data. The advantages of line access are high speed, safety, maximum reliability,

simultaneous Internet access for a large number of users and the possibility of a constant

connection of the computer system to the Internet.

Furthermore, the price of a leased HT line of 2 Mbit/s capacity amounts to HRK 3,375.0036

while Internet access at a speed of 2 Mbit/s by means of ADSL access over twisted-pair

copper wire, which includes unlimited Internet traffic, amounts to HRK183.7537

.

For that reason the above-mentioned service, considering its characteristics in terms of price

and functionality, does not represent an adequate substitute for ADSL access over twisted-pair

copper wire.

4.1.2.6. Access over optical fibre

In the period covered by questionnaires, a small number of end users, mostly business users,

used the service of broadband Internet access over optical fibre. However, with the increase of

the selection of contents requiring broadband Internet access and an increasing demand for the

service of IP television, users will need more capacity, that is, the demand for high-speed

broadband Internet access will grow.

Since optical fibre permits higher transfer speed than DSL technologies, which makes

possible the provision of high-quality services and supports advanced IP applications, such as,

for example, HDTV (High Definition Television), the Agency expects the number of users to

which operators will provide broadband Internet access service via optical fibre to increase,

that is, there will be more users who will be ready to pay a higher price for a service of a

higher quality.

As a result of the above, the Agency’s opinion is that broadband Internet access over optical

fibre will have a significant influence on competition at the retail level, that is, the mentioned

services will be substitutable with the already existing services based on ADSL technology

because this will satisfy the need of users for more quality, faster and innovative services.

36

VAT not included 37

VAT not included.



26

In conclusion, while analysing the substitutability of demand at the wholesale level, the

Agency will investigate the influence of new technology access networks on the existing

wholesale services, that is, in this case on the regulated wholesale service of unbundled access

to the copper-based local loop.

4.1.2.7. Conclusion

As a result, the Agency has concluded that the demand for the service of wholesale (physical)

network infrastructure access (including share or fully unbundled access) at a fixed location

access arises from broadband Internet access services provided at the retail level which are

based on:

• xDSL access over twisted-pair copper wire,

• access over cable networks, and

• access over optical fibre.

.

4.1.3. Demand-side substitution – wholesale level

Demand-side substitutability at wholesale level should serve to establish substitute services

for the currently valid service of wholesale (physical) network infrastructure access (including

share or fully unbundled access) at a fixed location, in the manner that the users of this

service, should the incumbent increase the price of the service, build their own access

infrastructure or start using some other wholesale service which will be regarded as equivalent

to the valid service of wholesale (physical) network infrastructure access (including share or

fully unbundled access) at a fixed location.

The prerequisite for the use of the broadband Internet access service and data transfer by the

end user is the existence of a certain transmission channel to the location of the end user

enabling the transmission of data in both directions at a speed permitting the provision of the

mentioned service.

In order to be able to provide broadband Internet access service at the retail level, operators

may build their own infrastructure up to the end user. This is the case of self-supply of

broadband Internet access, that is, the operator is not using the wholesale service of another

operator to provide broadband access service to end users.

A part of the infrastructure requiring the biggest investments is the local loop38

. Therefore, the

service of unbundled access to the local loop is an important prerequisite for operators

without their own infrastructure to be able to provide broadband Internet access service to its

own end users.

In the Republic of Croatia, an operator wishing to provide the service of broadband Internet

access to the end user, and does not have its own access infrastructure, may use the existing

wholesale service of unbundled access to the copper-based local loop in accordance with the

38

A local loop is a physical circuit connecting the network termination point at the subscriber's

premises to the main distribution frame or equivalent facility in the fixed public telephone network;.



27

conditions from the HT’s Reference Offer for the service of unbundled access to the local

loop.

The current service of unbundled access to the local loop is based on twisted-pair copper wire

and it includes the service of fully unbundled access to the local loop and the service of shared

access to the local loop which does not entail a change in ownership of the local loop and it is

provided only together with the collocation service. HT ensures access to the local loop only

for end users connected to HT’s electronic communications network or users at whose

location there has been installed an available inactive twisted-pair copper wire39

.

The service of fully unbundled access to the local loop provides to the operator access to the

entire frequency spectrum of the local loop (twisted copper pair) Figure 6 shows parts of

unbundled access to the local loop.

Figure 4 Unbundled access to the local loop

Source: HT’s Reference offer for the service of unbundled access to the local loop

On the other hand, the service of shared unbundled access to the local loop allows use only of

the non-voice band frequency spectrum of the unbundled local loop (twisted copper pair),

while the voice band of the frequency spectrum of the unbundled local loop is still used by

HT for the provision of publicly available telephone services. Figure 2 illustrates shared


39

Operational reserves are not regarded as available inactive twisted-pair copper wire.



28

Figure 5 Shared unbundled access to the local loop – HT’s Reference Offer

Source: HT’s Reference Offer for the service of unbundled access to the local loop

The service of fully unbundled access to the local loop and the service of shared unbundled

access to the local loop represent different technical solutions allowing the operator to provide

the service of access to fixed electronic communications network to end users over HT’s

access network.

The Agency considers the service of fully unbundled access to the local loop and the service

of shared unbundled access to the local loop as substitute services because in case of a

hypothetical price increase of the service of fully unbundled access to the local loop, the

operators using the latter service could, without significant additional costs, switch to the

service of shared unbundled access to the local loop..

Demand-side substitution should help establish substitute service for the wholesale service of

unbundled access to the copper-based local loop in the manner that users of this service, if HT

increases the price, can build their own infrastructure or start using the equivalent service

from another operator, that is, a service regarded as substitute service for the wholesale

service of unbundled access to the copper-based local loop.

4.1.3.1. Service of unbundled access to the local loop based on advanced technical

solutions in the access network as a substitute service for the service of

unbundled access to the copper-based local loop

By investing into the access network, operators place optical cables closer to the end user or

up to the end user’s premises, that is, they are partially or fully replacing the twisted copper

pair by optical fibres in order to be able to provide more quality and innovative services to

end users at greater access speed, and to reduce operational costs..

New generation access networks comprise the following technical solutions, that is, network

architectures:

• Fibre to the Cabinet (FttCab) concept – in which case twisted copper pair is used

from the end user to the street cabinet, and optical fibre is used from the street cabinet

to the MDF;

• Fibre to the Building (FttB) concept – in which case twisted copper pair is used from

the end user to the distribution point (installation cabinet) in a building, and optical

cable from the building to the MDF;



29

• Fibre to the Home (FttH) concept – in which case the existing twisted copper pair is

completely replaced by optical fibre from the operator’s MDF.

The Agency also discussed the substitutability between the service of unbundled access to the

local loop on the basis of the mentioned technical solutions in the access network and the

service of unbundled access to the local loop based on ADSL technology over twisted-pair

copper wire. Since the FttB solution is regarded as the FttH solution, although it is a hybrid

solution based on optical fibre and copper cables, it will be discussed in the part referring to

the service of unbundled access to the local loop based on the FttH solution.

.

4.1.3.1.1 Service of unbundled access to the local loop based on FttCab solution

By investing into the access infrastructure operators may shorten the twisted copper pair, that

is, the twisted-pair copper cable by replacing it with optical fibre from the main distribution

frame to the street cabinet (FttCab - Fiber to the Cabinet) or to some other point in the fixed

electronic communications network (See Figure 9). The beneficiary operator places DSLAM

inside a street cabinet or some other concentration point and via VDSL technology offers to

end users faster data transfer compared to data transfer provided by means of ADSL

technology. Therefore, in case of FttCab solution, the operator may unbundle access at the

street cabinet or other concentration point. In other words, this is the case of unbundled access

to the local sub-loop40

. Figure 6 FttCab solution

Source: ERG Opinion on Regulatory Principles of NGA, ERG (07) 16rev2

Note: SC – street cabinet

Considering the limitations of the existing twisted copper pairs, it is impossible to link a

certain DSL technology to every pair in a cable because in such cases mutual harmful

interferences (i.e. crosstalk) between pairs would be excessive and they would additionally

limit the range and quality of transmission. Furthermore, due to the overbooking, all users do

not get the same quality of service of broadband Internet access and IP television and some

twisted copper pairs do not even support the mentioned services. It follows from the above

that it may be expected in the upcoming period that the operators will invest in access

infrastructure in order to satisfy the needs of users, that is, in order to offer a wide range of

services such as the transfer of multi channel HDTV (eng. High Definition Television), video

on demand and video conferences, and voice over internet protocol services (VoIP).

Since the Agency has established at the retail level that broadband Internet access services via

VDSL technology may be regarded as substitute services for broadband Internet access via

40

Local sub-loop means a partial local loop connecting the network termination point at the subscriber's

premises to a concentration point or a specified intermediate access point in the fixed public telephone network.



30

ADSL technology, it is necessary to investigate whether the service of unbundled access to

the local sub-loop which is based on the FttCab solution and the service of unbundled access

to the copper-based local loop may be regarded as substitute services.

It has been European practice that former incumbents invest into their access infrastructure by

shortening the length of the twisted copper pair to the end user by installing optical fibre on

certain locations from the MDF to the street cabinet in order to be able to provide to those end

users who need greater access speed access to the broadband Internet access service and

related facilities via VDSL technology. The Agency thinks that HT should, pursuant to the

European practice, and in the time period covered by this analysis, provide services via the

VDSL technology and that they will not significantly differ from services provided over

ADSL technology and similar technologies, except in terms of quality. Therefore, these two

services, as it was concluded on retail level as well, may be regarded as substitute services.

Additionally, in accordance with the Explanatory Memorandum41

, technological

developments and new investments such as an upgrade of an existing service do not

automatically lead to a new or emerging market. Furthermore, if the upgraded service will

replace the existing service in such a manner that the existing service would no longer be

offered on the market, the upgraded or the new product should then be included into the

market dimension.

It may therefore be concluded that the modernisation of the access network based on the

construction of street cabinets and the shortening of the existing twisted copper pair represents

an upgrade of the access network based on the twisted copper pair. What follows form the

above is that the service of unbundled access to the local sub-loop, which is based on the

FttCab solution, does not represent a new market but enters a dimension of services of the

same relevant market whose dimension of services includes the service of unbundled access

to the copper-based local loop. The shortening of the twisted copper pair and applying of

VDSL technology do not destroy the possibility of access to the end user but access is only

provided over a shortened pair and by means of a different technology.

The behaviour of users at the retail level leads to substitute services for the service of

unbundled access to the local loop at the wholesale level. Since the service of unbundled

access to the local sub-loop based on FttCab solution will serve to provide a service of

broadband Internet access which is equivalent to the service of unbundled access to the

copper-based local loop, it may be concluded that the service of unbundled access to the local

sub-loop based on FttCab solution is a substitute service to the service of unbundled access to

the copper-based local loop.

It follows that, although in the Republic of Croatia there is no wholesale service of unbundled

access to the local loop that would allow an operator which does not have its own access

infrastructure to unbundle the twister-pair copper wire at the location of the street cabinet or

some other concentration point and to provide services to the end user over VDSL

technology, the Agency thinks that the service in question will become important in the time

period covered by this analysis, and that the service provided over unbundled local sub-loop

may be identical to the service provided over unbundled local loop. In other words, taking

into account the hypothetical price increase, the service of unbundled access to the local loop

41

Explanatory Memorandum, p. 18



31

based on FttCab solution is a substitute service for the service of unbundled access to the

copper-based local loop.

4.1.3.1.2 Service of unbundled access to the local loop based on FttH solution

In addition to investing into access infrastructure by replacing copper cables, that is twisted

copper pairs, by optical cables from the MDF to the street cabinet or some other concentration

point in the fixed electronic communications network, operators may completely replace the

twisted copper pair by optical fibre from the local exchange to the user’s premises (FttH -

Fibre to the Home).

Access network based on FttH solution may be realised in the following manner:

• Point to point link, where each directly connects the local exchange and the end

user (see Figure 10), and

• Passive optical networks (PON), which are structured in the manner that the signal

in the optical fibre is split into several fibres and vice versa, that several optical

signals are combined into one fibre (See Figure 11). In that case two or one fibres

may be used for two-way communication. If transfer takes place on one fibre,

input and output signals differ in wave length.

If operators decide to built FttH access network based on the point-to-point design, where

each directly connects the local exchange and the end user (see Figure 9), then this concept

allows access to the unbundled local loop (optical fibre) over an optical cable because every

user is allocated a separate optical fibre which may be individually unbundled.

Figure 7 Point-to-point FttH design


If operators decide to build a FttH access network based on a passive optical network (point-

to-multipoint) which enables the sharing of one optical fibre between several users (see figure

10), local loop unbundling will not be possible for several years, or, in other words, open

access to layer 1 of the OSI model42

will not be possible, but only to layers 2 or 3 (by means

of bitstream access services). Only new technological solutions in the area of WDM43

(CWDM44

and DWDM45

) technologies will make possible unbundled access based on

wavelength in PON architecture networks.

42 eng. Open Systems Interconnection Model 43

. wavelength-division multiplexing 44

coarse wavelength-division multiplexing



32

Figure 8 Point-to-multipoint FttH solution– PON architecture


FttH design includes FttB design where the optical cable is rolled out very close to the end

user, up to the building itself, and a twisted copper pair is used from the building to the end

user. In this case it is also possible to use point-to-point and point-to-multipoint solutions,

however, inside wiring remains copper based.

As it was already concluded in the previous chapter, as the selection of contents requiring

broadband Internet access and the demand for IP television increase, resulting in the demand

of users for more capacity, that is, for high-speed broadband Internet access, ADSL and

related solutions might prove to be inefficient in situations demanding simultaneous transfer

of voice telephony, interactive video and high-speed data services between end users and the

local exchange. Therefore, it may be concluded that operators can be expected to invest in

access infrastructure in order to satisfy the needs of users, that is, to be able to provide a wide

spectrum of services such as the transmission of multichannel HDTV, video on demand and

videoconferences, as well as the service of voice over the Internet protocol (VoIP).

If an operator decides to do so, he will be faced by significant investments which primarily

depend on the condition of the operator’s network and on competition at the retail level. Costs

of modernising the access network and of building new access networks to end users are

significant but the new generation access (in this case FttH) to the end user offers to the

operator who modernised its network a possibility for considerable and long-term savings in

terms of operational costs, and, more importantly, the platform i.e. the basis of the provision

of more quality, innovative and potentially more profitable services to end users.

HT notified the Agency in an official letter of 13 February 2008 of its intention to initiate a

pilot project aimed at testing the optical access infrastructure and the related network

solutions in order to, quote: … prepare the conditions for commercial supply of this

infrastructure to the wider population of users in the territory of the Republic of Croatia”.

This clearly shows that HT plans investments into the access network aimed at replacing

twisted copper pair wire with optical fibre.

Behaviour of end users at the retail level also results in substitute services for the service of

unbundled access to the local loop at the wholesale level. Since optical fibre allows greater

transfer speed than DSL technologies, which enables the provision of high quality services,

and supports advanced IP applications, such as, for example HDTV; the Agency thinks that

broadband Internet access service over optical fibre will have a significant influence on

competition at the retail level, i.e. these services will be substitutable with the already existing

45

dense wavelength-division multiplexing



33

services based on ADSL technology because they would satisfy the need of users for more

quality, faster and innovative services.

Since services provided by means of service of unbundled access to the local sub-loop based

on FttH solution will be equivalent to the service of broadband Internet access to a certain end

user provided via the service of unbundled access to the copper-based local loop, it may be

concluded that the service of unbundled access to the local loop based on FttH solution is a

substitute service for the service unbundled access to the copper-based local loop.

Additionally, in accordance with the Explanatory Memorandum46

, technological

developments and new investments such as an upgrade of an existing service do not

automatically lead to a new or emerging market. Furthermore, if the upgraded service will

replace the existing service in such a manner that the existing service would no longer be

offered on the market, the upgraded or the new product should then be included into the

market dimension.

What follows from the above is that because of technological changes, that is, technological

development, and bearing in mind the principle of technological neutrality, the Agency will

take into account all types of physical access infrastructure providing access to the end user

without limiting itself to the twisted copper pair. In other words, for the purpose of this

analysis, it shall consider the service of unbundled access to the fibre-based local loop as a

service equivalent to the service of unbundled access to the copper-based local loop.

The fact that, in case of investments into new generation access networks, civil engineering

works make 50-80% of network building costs47

, influences the possibility of other operators

on the market, except to the incumbent, who do not have a significant penetration rate and

density of users or their distributional telecommunication channels (DTC) doing the same

thing. In addition to open issues related to DTC and rights of ways, other operators have little

change of replicating the incumbent’s network which results in problems in case of

investments into new generation access networks. This should include the already made

investments of new operators, and the possibility of substitution.

Since access, and core, networks have been undergoing modernisation, the twisted copper pair

has been partially, or fully, replaced by optical fibre by means of shortening or disappearing,

this does not mean that the possibility of access or access to the end user in these cases

disappears but only that access is provided by means of a completely different technology.

The behaviour of users at the retail level leads to substitute services for the service of

unbundled access to the copper based local loop at the wholesale level.

In other words, from the principle of technological neutrality and the fact that access to the

certain end user is not provided over twister-pair copper wire but over optical fibre, it is

obvious that access over optical fibre represents a substitute service for unbundled copper-

based local loop access.

In accordance with EU recommendations, the analysis of this and other markets was

conducted by the Agency on the basis of the technological neutrality principle, which means

46

Explanatory Memorandum, p. 18 47




34

that access to the end user in case of replacement of twisted copper pair with optical fibre

remains the same, that is, the end user will still receive the service but the service will be

provided over a new access infrastructure.

What follows from the above is that because of technological changes, that is, technological

development, and bearing in mind the principle of technological neutrality, the Agency will

take into account all types of physical access infrastructure providing access to the end user

without limiting itself to the twisted copper pair. In other words, for the purpose of this

analysis, it shall consider the service of unbundled access to the fibre loop as a service

equivalent to the service of unbundled access to the copper-based local loop.

It follows that, although in the Republic of Croatia there is no wholesale service of unbundled

access to the local loop that would allow an operator which does not have its own access

infrastructure to provide broadband Internet access service over optical fibre, the Agency

thinks that service provided over unbundled access to the local loop based on FttH solution

may be equivalent to the service provided by means of unbundled access to the copper-based

local loop. In other words, taking into account the hypothetical price increase of the valid

wholesale service, the service of unbundled access to the local loop based on FttCab solution

is regarded as a substitute service for the service of unbundled access to the copper-based

local loop.

However, since unbundled access in case of PON architecture is not possible in the time

period covered by this analysis, the Agency deems it necessary to include into the dimension

of the relevant market only the service of unbundled access to the local loop based on point-

to-point FttH design.

4.1.3.2. Bitstream service as a substitute service for the service of unbundled access to

the local loop

In addition to the wholesale service of unbundled access to the copper-based local loop,

operators in the Republic of Croatia may provide the service of broadband Internet access to

end users via ADSL transport service or an operator may combine the ADSL transport with

the wholesale service of ADSL access, which corresponds to the service of bitstream access

pursuant to the conditions from the Annex to HT’s Reference Offer for providers of Internet

access service referring to broadband Internet access.

The wholesale ADSL transport service enables the operator to provide broadband ADSL

Internet services to its own end users who are at the same time HT’s subscribers for the

service of ADSL access, over IP/Ethernet platforms (the third option according to ERG’s

document on bitstream access. In other words, the beneficiary operator uses HT’s backhaul

capacities which ensure the transmission of signals between the access network and the core

network in order to offer retail service to its end users. The peculiarity of this service is that

HT offers to the operator only the usage of network transfer capacity (traffic) while Internet

access (monthly fee for access speed) is still charged top the end user by HT.

Pursuant to a decision adopted by the Agency’s Council48

from December 2007, HT has been

offering the service of ADSL access since February 2008 together with ADSL transport

service (which corresponds to bitstream access service), which enables to operator to provide

48

A decision of the Agency’s Council of 21 December 2007 (Class: 344-01/06-01/678;Reg.No: 376-11-07-27)



35

retail ADSL access service to its end users who are at the same time HT’s subscribers for

access to fixed public telecommunications network via POTS/ISDN BRA connections.

According to the Explanatory Memorandum49

, the wholesale service of unbundled access to

the local loop and the wholesale broadband access service, which includes bitstream access,

make two separate relevant markets susceptible to ex ante regulation 50

. An operator using the

service of unbundled access to the local loop will not consider the service of broadband access

as a substitute service although the wholesale service of unbundled access to the local loop

allows him to provide at the retail level a service equivalent to the one provided by means of


.

The service of unbundled access to the local loop gives an operator greater flexibility and

control when providing services to the end user since the operator runs DSLAM, and in this

manner the operator supplies to the end user a complete service, defines the technical and

qualitative characteristics of the service and access speed regardless of HT’s retail offer. The

plan for attracting end users by means of the service of unbundled access to the local loop

depends on the business plan of the new operator and the geographical areas in which the

operator wishes to enable the provision of ADSL access by installing DSLAMs, as opposed

bitstream access service where the incumbent defines the plan for the development of its

network which may not be influenced by the new operator.

The operator using the incumbent’s network by means of different forms of bitstream access

(the three options from ERG’s document on bitstream access51

) or just resells the incumbent’s

services may not completely influence technical and qualitative characteristics of the service

provided to the end user, as it is the case in local loop unbundling. The closer the operator is

to the end user from the point where resale takes place to the point of access to DSLAM, the

more influence it has on the quality of its own service.

The example of the existing wholesale ADSL transport, or bitstream access, shows that new

operators need only minor investments to attract end users, but this service does not allow

them to fully differentiate services intended for end users. The ADSLN transport or bitstream

access service allows an operator only to supply speed identical to or lower than the access

speed supplied by the incumbent at the retail level, and may not influence the possibility of

access to the end user, which is a very important fact because the network development plan

depends on the incumbent.

Therefore, since, in case of ADSL transport service, that is, bitstream access service, the

operator does not have full control over the access to the end user it may not freely

personalise its services for the end user, which is something that the service of unbundled

access to the local loop allows.

Furthermore, since the service of unbundled access to the local loop, without taking into

account the building of own infrastructure, occupies the highest place on the ladder of

investments, the operator using this service has incurred significant investment costs,

49

p. 33 50

In accordance with the recommendation from the Explanatory Memorandum that these two relevant markets

must be analysed together, that is, at the same time, the Agency initiated the process of market analysis of

wholesale broadband access simultaneous with the process of analysis of the market of wholesale network

infrastructure access (including shared and full access) at a fixed location, which is the subject ot this document. 51

ERG (03) 33rev2, ERG Common Position on wholesale bitstream access



36

including collocation costs, in order to have access to the main distribution frame in the local

exchange. Therefore, the operator in question, in case of a small but significant, permanent

price increase of the wholesale service of unbundled access to the local loop, from 5 to 10%,

will not regard ADSL transport service, that is, bitstream access service, as a substitute

service.

In conclusion, taking into account the characteristics of the wholesale service of ADSL

transport, that is, bitstream access in terms of price and functionality, the Agency’s opinion is

that thee services do not represent substitute services for the service of unbundled access to

the local loop, and, therefore, are not a part of the same relevant market.

4.1.3.3. Building own infrastructure as a substitute service for the service of unbundled

access to the local loop

In this part we consider the possibility of an operator investing into its own access

infrastructure because of a hypothetical increase in the price of the service of unbundled

access to the local loop.

The rolling out of own access network to the end user takes a long time and requires a lot of

sunk costs. The main reason for investing into one’s own access infrastructure is the sufficient

penetration and density of users. Consequently, only if there is an efficient ratio between

coverage and density, the building of own infrastructure would represent an adequate

substitute service for the service of unbundled access to the local loop supplied by the

incumbent.

Additionally, in accordance with European Commission guidelines on market analysis and

assessment of significant market power, if the user faces significant transfer costs in case of

substitution of service A with service B, these two services should not be included into the

same market.

.

Consequently, the Agency feels that the operator will not be encouraged by a hypothetical

increase in the price of the service of unbundled access to the local loop to build its own

access infrastructure, that is, that the building of own access infrastructure does not represent

a substitute service for the service of unbundled access to the local loop.

.

4.1.3.4. Broadband Internet access service for self-supply as a substitute service for the

service of unbundled access to the local loop

Given that at the retail level broadband Internet access services based on xDSL access over

copper, access over cable networks and access over optical fibre are regarded as substitute

services, it must be established whether there is at the retail level sufficient competitive

pressure from operators providing these service over their own infrastructure, that is, for the

purpose of self-supply, to the extent that they can influence the determination of prices of the

service of unbundled access to the local loop. In case of a significant competitive pressure at

the retail level, the dimension of services of the relevant market must include the service of

broadband Internet access provided by operators for the purpose of self supply.



37

The increase in the price of the wholesale service of unbundled access to the local loop

provided by the incumbent should result in the increase of the retail price of operators

providing broadband Internet access service to end users by means of unbundled access to the

local loop because operators will have to transfer the increase of wholesale costs to end users.

End users will be faced with the increase in the price of retail services based on the service of

unbundled access to the local loop and they will start using those services provided over own

access infrastructure, which represent substitute services at the retail level, because they will

be more affordable.

.

However, the Agency thinks that operators providing broadband Internet access service for

the purpose of self supply may not influence the setting of prices of the service of unbundled

access to the local loop at the retail level by means of competitive pressure. There is no such

competitive pressure that would prevent the incumbent from the intention to increase the price

of service between 5 and 10%, lacking regulation of the service of unbundled access to the

local loop, because operators do not have the option to switch to some other operators, and

they, most likely, in order to keep their end users, will not charge their end users the

difference in the price of wholesale service.

.

The Agency also feels that should the operator charge the difference in price in case of price

increase to the end user, those end users using the service of unbundled access to the local

loop will substitute this operator’s service with the service provided by HT because it has

greater penetration than the service supplied by other operators by means of their own

infrastructure. However, even on territories where operators provide broadband Internet

access service for the purpose of self-supply, there is no significant competitive pressure at

the retail level, and this is evident from the fact that HT is not forced to provide the service in

question at lower prices in these areas compared to some other areas.

Consequently, the Agency feels that, in the time period to which this analysis refers,

broadband Internet access service provided by other operators for the purpose of self-supply,

regardless of access infrastructure, does not fall into the dimension of services of the relevant

market.

On the other hand, due to the coverage of HT’s network, it is necessary to consider the

influence of the service of network access over copper provided by HT for the purpose of

self-supply. Since HT may, without significant additional costs, provide broadband Internet

access to all end users of the operator using the service of unbundled access to the local loop

for network access, the Agency thinks that, if the operator using the service of unbundled

access to the local loop transfers the hypothetical price increase of the relevant service on the

end user, the majority of its end users will switch to the service offered by HT. Also, one

needs to take into account the forward looking principle and consider the influence of the

service of network infrastructure access based on FttCab concept offered by HT for self-

supply and the service of network infrastructure access based on FttH concept offered by HT

for self-supply.. Although HT did not specify in questionnaires delivered for the purpose of

analysis of this relevant market that it provides the mentioned network infrastructure access

services to the end users, these types of broadband access provided by HT for self-supply

need to be included if we take into account the development of the market, and wholesale

services.



38

In conclusion, the service of network infrastructure access provided by HT for self-supply

needs to be included into the dimensions of services of the relevant market regardless of the

fact whether it is an access technology based on twisted copper pair, a hybrid solution which

includes twisted copper pair and optical fibres, or only optical fibre.

4.1.4. Supply-side substitution

Supply-side substitution means that other operators may, as a result of a hypothetical increase

in the price of the current wholesale service of unbundled access to the copper-based local

loop in the time period covered by this analysis, offer a service equivalent to this wholesale

service without incurring significant additional costs

The Agency expects that, in case of hypothetical increase in the price of the current wholesale

service of unbundled access to the local loop supplied by HT, no operator will be able to

replicate HT’s network infrastructure to be able to provide the service of unbundled access to

the local loop in the time period covered by this analysis because of significant sunk costs

related to the building of own infrastructure.

Furthermore, the Agency considered the possibility for an operator to start supplying a service

equivalent to the service of unbundled access to the local loop. In accordance with the

Explanatory Memorandum52

, unbundled access to the cable network is currently not

technically feasible or cost-effective. Therefore, the Agency thinks that unbundled access over

cable networks does not enter the dimension of service of the relevant market in the time

period covered by this analysis.

In conclusion, the Agency believes in the Republic of Croatia there is no substitute service for

the current service of unbundled access to the local loop in terms of supply.

.

4.1.5. Collocation service

The collocation service is a precondition for using the service of unbundled access to the local

loop. Therefore, the Agency deems it necessary to include the collocation service into the

dimension of services of the relevant market.

The collocation service means the provision of physical space and technical facilities

necessary to reasonably accommodate and connect the relevant equipment of a beneficiary for

the purpose of using the service of unbundled access to the local loop. There are the following

types of collocation:

• Physical collocation –collocation in separate premises for collocation, in street

cabinets and in premises of the main distribution frame;

• Distant collocation – collocation in premises or street cabinets which have been

installed or rented on public or private property by the operator using the collocation

service;

• Virtual collocation – collocation at the premises of the provider of the service of

collocation; in this case the beneficiary operator of the service of collocation does not

have the authorisation to access the equipment necessary for the service of unbundled

52




39

access to the local loop but the equipment is located, installed, maintained and run

only by the operator offering the service of collocation.

Furthermore, the dimension of services of the relevant market should include the service of

collocation for every technical possibility for the local loop unbundling entering the market

dimension.

4.1.6. Conclusion on the relevant market in the dimension of services

As a result, the Agency has concluded that the relevant market of wholesale (physical)

network infrastructure access (including shared or fully unbundled access) at a fixed location

includes the following services:

• The service of full unbundled access to the copper-based local loop and local sub loop authorising the operator to use the full frequency spectrum of the local loop,

• The service of full unbundled access to the copper-based local loop and local sub-loop authorising the operator to use only the non-voice band of the frequency

spectrum of the unbundled loop or local sub-loop (twisted copper pair), while the

voice band of the frequency spectrum of the unbundled loop or local sub-loop is still

used by HT for the provision of publicly available telephone service,

• The service of unbundled access to the fibre loop by means of point-to-point link ,

• The service of network infrastructure access provided by HT for self-supply regardless of the fact whether access technology is based on twisted-copper pair, a

hybrid solution including both twisted copper pair and optical fibre or on optical fibre,

• A collocation service, including physical, distant and virtual collocation.



40

4.2. Relevant market in the geographical dimension

A relevant market in the geographical dimension comprises all areas where certain operators

provide services under equivalent conditions, that is, all areas where there are equivalent

conditions for competition.

In accordance with European Commission guidelines and recommendations, geographical

dimension of a relevant market is mostly determined on the basis of network coverage and

existence of an identical legal and regulatory framework in a certain geographical area.

Consequently, and on the basis of the conducted analysis, the Agency thinks that the scope of

the relevant market of wholesale (physical) network infrastructure access (including shared

and fully unbundled access) at a fixed location in the geographical dimension is national, that

is, the relevant market in the geographical dimension is the entire territory of the Republic of

Croatia. This conclusion is based on the fact that HT provides the current service which is a

part of the relevant market in the entire territory of the Republic of Croatia for all operators,

under equivalent conditions and at equivalent prices. And secondly, the regulatory framework

applicable to the service in question, that is, the legal and regulatory framework for the

electronic communications sector, is identical in the entire territory of the Republic of Croatia

4.3. Opinion of the competent regulatory authority on the definition of the

relevant market

On the basis of the conducted analysis, the Agency has concluded that the relevant market of

wholesale (physical) network infrastructure access (including shared and fully unbundled

access) at a fixed location comprises the following services:

• The service of fully unbundled access to the copper-based local loop and copper-based local sub loop authorising the operator to use the full frequency spectrum of the

local loop,

• The service of fully unbundled access to the copper-based local loop and copper-based local sub-loop authorising the operator to use only the non-voice band of the

frequency spectrum of the unbundled loop or local sub-loop (twisted copper pair),

while the voice band of the frequency spectrum of the unbundled loop or local sub-

loop is still used by HT for the provision of publicly available telephone service,

• The service of unbundled access to the fibre local loop by means of point-to-point

link,

• The service of network infrastructure access provided by HT for self-supply regardless of the fact whether access technology is based on twisted copper pair, a

hybrid solution including both twisted copper pair and optical fibre or on optical fibre,

• A collocation service, including physical, distant and virtual collocation.

Furthermore, the Agency has defined that the relevant market in the geographical dimension

is the national territory of the Republic of Croatia.

.



41

5. Objective and Subject of Market Analysis

In accordance with the criteria laid down in ECA, in the process of market analysis, the

Agency shall evaluate the efficiency of competition in a certain relevant market and assess the

existence of operators with significant market power in a certain relevant market. It shall

adopt a decision thereof in accordance with ECA and the opinion of the authority competent

for competition.

An operator shall be deemed to have significant market power if, either individually or jointly

with other operators, it enjoys a position equivalent to dominance, that is to say a position of

economic strength affording it the power to behave to an appreciable extent independently of

competitors, users of services and consumers.

For the purpose of assessing significant market power of an operator, the Agency shall

calculate the market share in a certain relevant market and interpret it in accordance with the

European Commission guidelines on relevant markets and with the relevant European Union

acquis communautaire in the competition sector.

After having identified and defined a relevant market, as described in chapters 3 and 4 of this

document, the Agency shall, on the basis of collected data and in accordance with criteria

referred to in Article 55 of ECA, assess whether there is on the market in question an operator

with significant market power who is in such a position of economic strength affording it the

power to behave to an appreciable extent independently of competitors, users of services and

consumers.

When assessing the individual significant market power of an operator in the relevant market

of wholesale (physical) network infrastructure access (including shared and fully unbundled

access) at a fixed location, the Agency applied the following criteria:

• market share of the operator in the relevant market;,

• control of infrastructure where there are high barriers to the development of

infrastructural competition,

• economies of scale;

• economies of scope;

• lack of countervailing buying power,

• level of vertical integration.

.

5.1. Market share of an operator on the relevant market

The market share of an operator is a measure of a relative size of a certain operator in the

market and it is expressed as a percentage share of the operator in the total volume of

provided services and/or income earned on the relevant market over a certain period of time.

.



42

For the purpose of assessing the significant market power of an operator, the Agency shall

calculate the market share on a certain relevant market and interpret it in accordance with the

European Commission guidelines and with the relevant European Union acquis

communautaire in the competition sector.

Although, according to the Guidelines, although a high market share alone is not sufficient to

establish the possession of significant market power, it is unlikely that an operator without a

significant share of the relevant market would be in a dominant position. Thus, operators with

market shares of no more than 25 % are not likely to enjoy a (single) dominant position on the

market concerned. In the Commission's decision-making practice, single dominance concerns

normally arise in the case of operators with market shares of over 40 %, although the

Commission may in some cases have concerns about dominance even with lower market

shares. According to established case-law, very large market shares, in excess of 50 %, are in

themselves, save in exceptional circumstances, evidence of the existence of a dominant

position.

An operator with a large market share may be presumed to have SMP if its market share has

remained stable over a certain period of time. The fact that a SMP operator is gradually losing

market share may well indicate that the market is becoming more competitive, but it does not

preclude a finding of significant market power. On the other hand, fluctuating market shares

over time may be indicative of a lack of market power in the relevant market.

In accordance with the established dimension of services and the geographical dimension of

the relevant market of wholesale (physical) network infrastructure access (including shared

and fully unbundled access) at a fixed location), and considering the fact that only HT

supplies the service of unbundled access to the copper-based local loop, including shared and

fully unbundled access) in the observed period, the Agency’s conclusion is that HT has a

100% market share in the relevant market.

Figure 11 illustrates the percentage share of the service of network infrastructure access over

twisted-copper pair provided by HT for the purpose of self-supply and the percentage share of

the wholesale service of unbundled access to the local loop53

offered to other operators. The

share of the wholesale service of unbundled access to the local loop has grown in the

observed period of time but network infrastructure access provided by HT for self-supply is

still significant.

Figure 9 Network infrastructure access

53

Service of unbundled access to the local loop includes full and shared unbundled access to the local loop.



43

Source: Questionnaire for wholesale network infrastructure access

5.2. Control of infrastructure in case of significant problems for

infrastructure competition

Capital investments necessary for the building and installation of access network

infrastructure are extremely high and require detailed business plans and a reasonable rate of

return on investments. Market entry requires significant investments from new operators

which mostly consist of sunk costs which operators will not be able to recover in case of

market failure and exit from the market.

In order to roll out access network based on twisted copper pairs or optical fibre to the end

users, a new operator must build its own access infrastructure to the end user or it may use the

access infrastructure of another operator. Building own access infrastructure is difficult not

only because of significant sunk costs resulting from the need for civil engineering works and

for rolling out the distribution telecommunication cables but also because it is impossible to

get the necessary building permits. Taking into account the geographical distribution of HT’s

access (network) infrastructure, and the fact that it was being built over a long period of time,

that is, when HT was a public company enjoying exclusive rights, it is not economically

justified to replicate HT’s access (network) infrastructure.

Furthermore, investments into new generation networks, rolling out of optical cables within

the existing access infrastructure, to the street cabinet or to the end user’s premises, make a

very small share in the total costs of the building of access infrastructure since costs of civil

engineering works amount to about 50-80% of total costs of building access infrastructure.

The Agency, therefore, thinks that HT will strengthen its market position by investing into

access optical network because in most cases it already has an access infrastructure within

which it will implement optical access network. This puts it at an advantage in relation to

other operators. Secondly, by investing into optical access network, HT may design such

network architecture that will strengthen its market position, which, in the end, might lead to

the re-emergence of monopoly in the market.

99.96%

0.04%

99.27%

0.73%

97.79%

2.21%

95.79%

4,21%

0%

20%

40%

60%

80%

100%

2006/2 2007/1 2007/2 2008/1

Full access to unbundled local loop

HT network infrastructure access for self-supply



44

Consequently, the Agency thinks that, during the period of validity of this analysis, no

operator will be able to replicate HT’s network infrastructure and thus endanger its market

position in the relevant market. Moreover, based on control of infrastructure, HT has been

additionally strengthening its market position by investing into optical access network.

5.3. Economies of scale

Economies of scale occur when average production costs decrease with the increase of output

that is, average costs decrease with the increase in the volume of production, and an

undertaking with a large volume of production is able to cover costs at a lower price than

smaller undertakings. The possibility to ensure lower costs, and thus lower prices, represents

an important source of competitive advantage on markets where price competition is the main

form of rivalry between undertakings.

What follows from the above is that economies of scale are characteristic of production

processes characterised by high fixed costs, which is a feature of electronic communications

markets. In other words, on the basis of the existing production capacities, that is, of the

existing infrastructure, every additional unit of service is produced at lower average fixed

costs per unit of service. HT has significant advantage over other operators from the point of

view of economies of scale because it may supply services at significantly lower costs than

other operators who have to build or upgrade the existing network infrastructure. Therefore,

potential operators who would like to enter the market would not be able to offer prices lower

than the ones offered by HT because of high service provision costs, and they would thus

have trouble attracting users on the market.

5.4. Economies of scope

Economies of scope are characterised by a decrease in average production costs which may be

achieved if an undertaking produces a certain number of closely related products. They occur

if total production costs of two or more products are lower than the production of these same

products in separate plants or undertakings. This represents an economy of savings on costs

achieved by a joint conduct of a large number of different activities within the same company

by using joint input or by joint upgrading of products or by their joint distribution.

.



45

Economies of scope refer to an operator’s potential advantages achieved by offering different

products and services together. HT has developed its network over the years, and offers, in the

entire territory of the Republic of Croatia, through its widespread distribution network, a wide

spectrum of services to a large circle of users. Although it mostly provides a publicly

available telephone service, there is an increasing trend in the number of users to which it

provides broadband Internet access in the form of a MAXadsl service and IP television in the

form of MAXtv service. By being present in a large number of markets, HT has been using

the advantages offered by economies of scope.

In order to be compete with HT by enjoying the benefits of the economies of scope

themselves, other operators need to enter a large number of markets at the same time, which

increases their entry costs which they will not be able to recover once they decide or are

forced to withdraw from the market.

It may, therefore, be concluded that the existence of the economies of scope may represent

entry barriers for operators who are just entering or are planning to enter the market.

5.5. Lack of countervailing buying power

Countervailing buying power exists when an operator using a certain wholesale services

possesses such economic strength enabling it to respond to a price increase or to a threat of a

price increase of this wholesale service within a reasonable time in the manner that it starts

buying from another operator. The bigger the share of income earned by the operator from a

certain operator using the wholesale service in the total income from that wholesale service

the bigger the negotiating power and the ability of the beneficiary operator using the

wholesale service to impose its own interests and the possibility to threaten the market

position of the operator supplying the wholesale service.

As it was already mentioned, HT is the only operator supplying the wholesale service of

unbundled access to the copper-based local loop. Since no other operator supplies the

identical service, operators using the existing wholesale service do not have the adequate

countervailing buying power to be able to improve their negotiating position, better control

prices or some other business conditions and thus endanger HT’s market position on the

market of wholesale (physical) network infrastructure access (including shared or fully

unbundled access) at a fixed location.

5.6. Level of vertical integration

Vertical integration means that an operator is present at several different, vertically connected

wholesale and retail markets.

In accordance with the European Commission Guidelines, vertical integration is treated as

obtaining market power. Such an obtaining of market power is an attempt at squeezing out the

competition from a potentially competitive market or just creating problems for competitors

when entering the market. .

HT is a vertically integrated operator active also in the market of wholesale (physical)

network infrastructure access (including shared or fully unbundled access) at a fixed location,

and on the retail broadband access market where it offers broadband Internet access service to



46

end users over twisted copper pair. There is another company active in the retail broadband

access market Iskon Internet d.d., which is 100%-owned by HT. In this manner, and taking

into account the fact that HT disposes of network infrastructure in the entire territory of the

Republic of Croatia, vertical integration and control over infrastructure provide it with a key

advantage in relation to other operators in the retail market, in particular those to whom they

offer services on the retail market on the basis of the wholesale service of unbundled access to

the local loop thus enabling it to use significant market power in the wholesale market, in the

absence of regulation. In this manner, HT may, by creating barriers to wholesale access,

prevent new operators form providing a competitive retail service which consequently causes

a fall in their sale and income and the deterioration of their market position. Furthermore,

vertical integration and control of infrastructure would enable HT to apply price

discrimination and price squeeze. Considering all of the above, it may be concluded that new

operators, when providing their services, depend on HT to provide them with access to end

users.

As it may be concluded, a high level of vertical integration additionally strengthens HT’s

market position

5.7. Conclusion on the assessment of the existence of operators with

significant market power and the evaluation of effiectiveness of

competition

On the basis of the analysis, the Agency established that the relevant market of wholesale


fixed location is not considered to be effectively competitive and that HT has significant

market power on this relevant market, or, in other words, that it has a dominant position,

meaning that it has such economic strength affording it the power to behave to an appreciable

extent independently of competitors, customers and ultimately consumers.

The Agency has concluded that HT enjoys significant market power on the basis of a high

market share which was stable in the observed period and amounted to 100%. Furthermore,

the Agency has supported the mentioned conclusion by other criteria referred to in Article 55

of the ECA, such as control of infrastructure where there are high barriers to the development

of infrastructural competition, economies of scale, economies of scope, lack of countervailing

purchase power, and the level of vertical integration. The Agency thinks that the analysis of

other criteria is not necessary, that is, that other criteria, in addition to the analysed ones,

would also lead to the conclusion that HT has significant market power on the relevant market

of wholesale (physical) network infrastructure access (including shared or fully unbundled

access) at a fixed location.



47

6. Competition Problems

This chapter will focus on all possible competition problems that might occur on the relevant

market or markets in the absence of regulation. It will also deal with the best possible way of

imposing regulatory obligations that will most efficiently remove the noticed problems, which

should, in turn, lead to the removal of barriers to market entry and to the development of

competition in the market with the final objective to defend the interests of end users.

Pursuant to Article 56, paragraph 3 of ECA, regulatory obligations must be based on the

nature of the identified market problem, and must be proportionate and justified considering

the regulatory principles and objectives referred to in Article 5 of ECA.

A competition problem is any behaviour of an operator having significant market power

aimed at excluding the existing competitors from the market, preventing market entry to new

competitors or any behaviour contrary to interests of end users54

.

Since the procedure for imposing regulatory obligations, defined in a new regulatory

framework and ECA, does not presuppose that the exploitation of the status of significant

market power actually occurred, any competition problem may be observed as a potential

competition problem, that is, a problem the occurrence of which may be assumed under

certain circumstances.

Although possible competition problems have already occurred in the regulatory practice of

European countries, it is regarded that not all of the existing/already familiar problems may

automatically occur in any market and in any situation. The biggest difference between the

old regulatory framework and the Telecommunications Act and the new regulatory

framework and the ECA lies here. The old legislative framework automatically prescribed

that an SMP operator had all the obligations defined in the Telecommunications Act, without

having to prove that they were necessary. However, in accordance with the above-mentioned

Article 56, paragraph 3 of the ECA, a regulatory authority must conduct an analysis to

recognise all possible competition problems in order to prevent their occurrence in practice by

imposing justified regulatory obligations. As a result, the Agency thinks that regulatory

intervention, that is, the imposition of regulatory obligations always has to be based on

specific national circumstances established in the market analysis procedure (market

definition and the assessment of the efficiency of competition) referred to in Chapters 4 and 5

of this document.

There are three basic types of behaviour recognised in regulatory practice which create

competition problems. They are the following:

1. transfer of market power from one market in which an undertaking has significant

market power into an adjacent vertically or horizontally related market;

2. different behaviours of operators having significant market power that may be used to

keep significant market power in a certain market (erecting barriers to entry) and

3. behaviours that may be summed up under the name “textbook monopoly behaviour”.

54

Quote from Revised ERG Common Position on the approach to appropriate remedies in the ECNS regulatorey

framework; Final Version May 2006 (ERG (06) 33)



48

Competition problems by definition refer to:„any behaviour of an operator having significant

market power” meaning that the recognition of possible competition problems mostly refers

to the discovery of situations in which behaviours of operators having significant market

power may be recognised. In order to be able to have a preventive influence on any behaviour

which has a negative impact on the development of competition and any behaviour contrary

to the interests of end users, regulatory obligations must influence and regulate the behaviour

of operators having significant market power. Therefore, regulatory obligations have,

according to the new regulatory framework and the ECA, been aimed at preventing certain

behaviours of operators. All of the above does not mean that certain problems in a market do

not result from structural and regulatory problems as well, which will also be taken into

account in the imposition of regulatory obligations.

In the previous text there have been identified three basic types of behaviour creating

competition problems. However, competition problems may also be observed from two basic

angles/dimensions, including:

• marked dimension and

• “cause-and-effect” type dimension.

.

6.1. Market dimension of competition problems

Four different cases have been recognised in regulatory practice in the context of market

dimension. They depend on the levels on which they take place. These are the following:

6.1.1. Vertical leveraging

Vertical leveraging refers to a situation in which an operator is present on several different

markets, or, more precisely, on a wholesale and a vertically related retail market.55. An

operator having significant market power in a certain wholesale market offers certain

wholesale services which are necessary for the provision of services in a downstream

vertically related retail market. The operator having significant market power may attempt to

leverage its market power from the market in which it has significant market power to a

potentially competitive retail market. If leveraging is successful, the operator will then have

market power on both, the wholesale and the retail market. This dimension differentiates

between 11 typical behaviours of SMP operators, which have been recognised in regulatory

practice, and defined in Chapter 6.3 of this document.

6.1.2. Horizontal leveraging

Horizontal leveraging is a situation in which an operator does business in different markets

which are not vertically related, and has significant market power on one of them. Under

certain circumstances, it may then try to transfer its market power from the market where it

has SMP to a potentially competitive market. Horizontal leveraging may occur between retail

55

An operator having significant market power may be present in two associated vertically related wholesale

markets.



49

markets as well as between wholesale markets or between a wholesale and a, not vertically

related, retail market. This dimension differentiates between 2 typical behaviours of operators

having significant market power which have been recognised in regulatory practice, and

defined in Chapter 6.3 of this document.

6.1.3. Single market dominance

This case refers both to a potential wholesale, and a potential retail market. In this case, a

SMP operator may engage in different behaviours aimed at erecting barriers to entry into the

market in order to protect its significant market position or it may engage in textbook

monopoly behaviour in order to preserve its position of significant market power. All these

procedures influence interests of end users in the end. This dimension distinguishes between

10 typical behaviours of operators having significant market power which have been

recognised in regulatory practice, and defined in Chapter 6.3 of this document.

6.1.4. Call termination

This dimension, although it contains typical behaviours defined in the three above-mentioned

cases, deserves a special section because termination markets are markets of a different nature

than other markets. Termination markets refer to a situation of two-way access in which two

or more networks provide the same services and they must interconnect so that their end users

may communicate. In this situation different operators negotiate interconnection agreements

at the wholesale level. After having agreed upon wholesale interconnection conditions, they

set their prices on the retail market where they may or may not be competitors (fixed and

mobile networks operators). As it was already mentioned, due to a specific nature of

termination markets, typical behaviours, that is, competition problems in the other above-

mentioned cases, have also been dealt with in this case. This dimension differentiates between

10 typical behaviours of operators having significant market power which have been

recognised in regulatory practice, and defined in Chapter 6.3 of this document. However,

some other behaviours or competition problems defined in the first three cases are possible in

termination markets as well.

6.2. Cause-and-effect type of dimension of competition problems

The second dimension that needs to be taken into account in relation to operator behaviour or

possible competition problems is the cause-and-effect type dimension. Every competition

problem, that is, certain behaviour of the operator having significant market power has a

specific goal, or, in other words, every behaviour is a cause leading to a certain effect on the

market, on existing and potential competitors or on end users.

The cause-and-effect type dimension is a different way of looking at competition problems

and it helps with the dynamic, time-related understanding of consequences of certain

competition problems, that is, of the behaviour of SMP operators.

The cause-and-effect dimension in the regulatory practice is made up of the following

elements:

a) Strategic variables: price, quality, time, information etc.



50

b) Behaviour: price discrimination, quality discrimination, delaying tactics, withholding

of information, etc

c) Consequences raising rivals’ costs, restriction of competitors’ sales, margin squeeze,

foreclosure, etc.

6.3. Overview of competition problems recognised in the European

practice

As it was already mentioned, competition problems refer to certain behaviours of operators

with significant market power.

According to ERG (06) 33 document, there are 27 usual competition problems which have

been identified in European regulatory practice. Most of the problems identified are based on

experiences of regulatory authorities and reflect electronic communications markets reality.

However, there is nothing preventing a regulatory authority from identifying possible

competition problems outside the set framework, which are specific for a certain country or a

certain market.

Bearing in mind what was already dealt with in the previous chapter, that is, market and

cause-and-effect type dimension of competition problems, that is, of the behaviour of

operators, below is a list of 27 standard competition problems which have been identified in

practice. This list contains both the market and the cause-and-effect dimension in the part

mentioning strategic variables and behaviour of operators.

Standard competition problems according to market dimension and behaviour of operators are

the following:

Vertical leveraging

• refusal to deal/denial of access

• discriminatory use or withholding of information

• delaying tactics

• bundling/tying

• undue requirements

• quality discrimination

• strategic design of product

• undue use of information about competitors

• price discrimination

• cross-subsidisation

• predatory pricing

Horizontal leveraging

• bundling/tying

• cross-subsidisation

Single market dominance

• strategic design of product to raise consumers’ switching costs

• contract terms to raise consumers’ switching costs

• exclusive dealing

• over-investment



51

• predatory pricing

• excessive pricing


• lack of investment

• excessive costs/inefficiency

• low quality

Call termination

• tacit collusion(i)

• excessive pricing


• refusal to deal/denial to interconnect

In order for the regulatory authority to be able to chose those regulatory obligations that will

best resolve the identified competition problems in the relevant market/s, the principal thing is

to find the cause, that is, the source of the operator’s significant market power. According to

the Agency’s opinion, the cause or source of an operator’s significant power indicates the

existence of certain competition problems in the absence of regulation.

By means of a timely reaction and adequately imposed regulatory obligations a regulatory

authority may influence and prevent the transfer of significant market power to neighbouring

markets and the erecting of barriers to entry, and thus directly assist market entry and

development of market competition. In those markets were market entry of new operators is

less likely and where market power remains/resists due to the first mover advantage56

, a

regulatory authority must protect the users from behaviours which are against interests of end

users and from the inefficiency of the operator with significant market power.

It may be concluded from all of the above that the selection of the adequate regulatory

obligation and the recognition of the cause of the problem demand an overview of the total

situation on markets and determination of the source of significant market power along with

the definition of possible structural and regulatory problems, which was, as it was already

stated, established in the market analysis procedure (identification of the market and

assessment of the effectiveness of competition).

6.4. Competition problems on the market of wholesale network

infrastructure access (including shared or fully unbundled access) at a

fixed location

In the process of identification of possible competition problems in the relevant market, the

Agency shall take into account all possible problems already identified in the European

practice the occurrence of which is, without regulation, possible in the relevant market. It will

elaborate them in detail and, on the basis of this chapter, impose regulatory obligations in

Chapter 7 of this document. These regulatory obligations will, in accordance with principles

of previous regulation, serve best to solve the mentioned market problems and be in

compliance with Article 56, paragraph 3 of the ECA.

56

(eng. First mover advantage)



52

On the basis of what has been said in this Chapter, and based on market definition and the

assessment of the effectiveness of competition and the identification of the operator with

significant market power, taking into account the criteria which have proven the existence of

significant market power, the Agency believes that competition problems might occur in the

relevant market in the absence of regulation. These problems would mostly refer to vertical

leveraging.

According to the ERG (06) 33 document, there are three strategies for vertical leveraging:

• Refusal to deal/denial of access

• Leveraging by means of non-price variables

• Leveraging by means of pricing

The Agency has, therefore, classified competition problems in the relevant market of


access) at a fixed location according to the above-mentioned classification. Every competition

problem deemed by the Agency to be possible without regulation has been dealt with

separately in the following chapters.

The Agency distinguishes between two types of competition problems: those which have

already happened in practice in markets defined by the TA and those competition problems

which might happen in the relevant market which is the subject of this document, without

regulation, that is, competition problems that might occur if the Agency did not regulate the

market where there are operators with significant market power.. When imposing regulatory

obligations, in accordance with ERG document (06) 33, the Agency did not differentiate

between the above-mentioned two types of competition problems and it has imposed

regulatory obligations accordingly. In other words, when imposing regulatory obligations it

does not matter if a certain problem occurred in practice or if the Agency envisaged the

possibility of a certain problem occurring in the future.

6.4.1. Refusal to deal/denial of access

In the European case-law, refusal to deal does not refer only to a situation in which an

operator having significant market power absolutely refuses to offer/provide a wholesale

service but also to a situation in which the SMP operator is willing to provide the service but

on unreasonable terms.57

. This part deals only with outright refusal to deal/denial of access,

while refusal to negotiate on reasonable terms is dealt with together with other competition

problems such as unreasonable demands, excessive pricing etc.

A SMP operator on the wholesale market may attempt to leverage its market power by

denying access to or refusing to deal with undertakings operating downstream and competing

with the incumbent’s retail arm or affiliates. Such behaviour can create competitive harm

when an operator with significant market power controls a service which is essential for other

operators to be able to provide services to end users on a downstream retail market.

The Agency thinks that, without regulation, a SMP operator might feel, for the purpose of

vertical leveraging, a strong need to deny access to its network and refuse to deal with the

57

ERG document, ERG (06) 33



53

existing or potential competitors using this wholesale service to provide services on a

downstream retail market. A vertically integrated operator having significant market power

on a relevant market might deny access to services included in the market dimension58

, which

would result in the fall in the retail market share of existing operators who depend on the SMP

operator’s wholesale service to supply services on the retail market thus preventing the entry

of new operators.

Having concluded in Chapter 5.7 of this document that HT is the operator with significant

market power in the Republic of Croatia and a vertically integrated operator, the Agency

thinks that HT could, without regulation, have interest in supplying operators with the

wholesale service of unbundled access to the local loop and the collocation service on

unreasonable terms, or not even offer access to the local loop and sub-loop and the collocation

service.

This would allow HT to vertically leverage its significant market power to a downstream

retail market thus strengthening HT’s market position at the retail level since operators who

are currently using the service of unbundled access to the copper-based local loop could not

compete with HT in the provision of fixed network access and convergent broadband Internet

access. This is because, as it was already mentioned in Chapter 5.2 of this document, HT’s

access network cannot be replicated in the time period covered by this analysis. Also, all

operators’ investment would be lost thus making a negative impact on operators using the

wholesale service in question and forcing them to withdraw from the market which, in turn,

would have a negative impact on competition.

Furthermore, without regulation of new generation networks, HT could deny access to the

local copper sub-loop or access to the fibre loop by means of point-to-point link, which would

result in the leveraging of significant market power and strengthening of HT’s market position

at the retail level of the provision of service of broadband Internet access and access to the

fixed network, and it might result in withdrawal of other operators from the market and

restoration of HT’s monopoly.

.

Therefore, without regulation of access to he local loop and the local sub-loop, regardless of

the applied technology, the existing and potential competitors would not be able to provide

the services of broadband Internet access at the retail level or access to fixed network, and in

the future the service of IP television, or differentiate these services significantly in the terms

of technical features, quality and price from the equivalent services provided by HT. In other

words, the Agency thinks that the existing and potential competitors do not enjoy sufficient

negotiating power to be able to force HT to provide access on reasonable commercial terms or

even to provide the service of access to the local loop and sub-loop and the collocation service

at all.

Consequently, the denial of access to unbundled access to the copper-based local loop and the

refusal to negotiate and provide access based on new generation networks would result in the

increase in costs of other operators, the inability to effectively compete with HT’s retail arm

and its affiliated companies, the leveraging of HT’s significant market power onto a retail

market and, finally, to the withdrawal of operators using this wholesale service from the

market.

58

Defined in Chapter 4.3. of this document



54

In conclusion, it must be emphasised that, if the operators were not able to provide at the retail

level a service based on the service of unbundled access to the local loop, this would have a

negative impact on end users who would not have the option to choose between prices,

quality and services offered to them

6.4.2. Leveraging by means of non-price variables

6.4.2.1. Discriminatory use or withholding of information

This part deals with a competition problem which refers to a situation in which an operator

with significant market power in a wholesale market provides information important for the

provision of retail services to its retail arm or affiliate undertakings but withholds information

from operators using or intending to use the SMP operator’s wholesale service on the basis of

which they provide/wish to provide retail services competitive to services provided by the

SMP operator’s retail arm, that is, its affiliates. This problem also refers to a situation in

which an operator having significant market power withholds some other information

important for the use of the wholesale service. By behaving in this manner, the operator with

significant market power leverages its dominant position to the retail level by placing

operators beneficiaries of the wholesale service into an unfavourable position in relation to its

own retail arm, that is, to its affiliates.

The Agency thinks that HT, as the operator with significant market power on the wholesale

market of (physical) network infrastructure access (including shared and fully unbundled

access) at a fixed location and a vertically integrated operator, might, without regulation,

withhold important information from operators using or intending to use the wholesale service

of unbundled access to the local loop by not providing them with information as detailed as

information provided to its retail arm or affiliated companies. It might also not provide

information in time for the operator using the mentioned wholesale service to react at the

retail level and compete with its retail arm disposing of the necessary information.

Furthermore, investments into new generation networks result in the opening of new points of

access and the Agency thinks that HT might, without regulation, withhold detailed and timely

information on planned changes in the network from its existing and potential competitors,

which would have a negative impact on business plans and investments of these operators

because they would not be able to estimate the impact of such changes on time and consider

different possibilities of investing into their own network or timely react at the retail level. In

this manner, HT could abuse the first mover advantage and place its own retail arm and

affiliated companies into a more favourable position at the related retail market than the

existing and potential competitions. In other words, it might leverage its market power to the

downstream retail market thus strengthening its market position and having a negative impact

on effective competition at the retail level.

6.4.2.2. Delaying tactics

By applying delaying tactics the operator having significant market power does not refuse to

provide a certain wholesale service but provides this service later than to its own retail arm or

affiliated companies thus placing the existing and potential competitors to a disadvantage at

the downstream retail level. These tactics refer to delaying of negotiations on the provision of



55

a wholesale service or by lying about certain technical problems with the provision of this

service.

The Agency thinks that HT, as the operator having significant market power on the market of


access) at the fixed location and a vertically integrated operator, might, in the absence of

regulation, delay the provision the relevant wholesale service to its downstream existing and

potential competitors as opposed to the provision of the same service to its own retail arm or

affiliated companies.

Moreover, the former behaviour of HT, which was also recognised during control), shows that

the existing of regulation does not prevent HT from establishing the service of unbundled

access to the local loop and the collocation services within longer deadlines than for the

provision of this service to its affiliated company, meaning that regulatory obligations in this

area need to be strengthened since HT might continue to abuse its significant market power.

In this manner HT has been strengthening its market position in the provision of broadband

Internet access and access to the fixed network at the retail level since its retail arm or

affiliated company are able to offer to the end user the service of broadband Internet access,

that is, access to the fixed network sooner than to other operators influenced by HT’s

behaviour at the wholesale level who need the relevant wholesale service to be able to provide

services at the downstream retail market. Furthermore, the application of delaying tactics at

the relevant wholesale market would allow HT to continue to maintain its market share at the

downstream retail market, i.e., in the provision of services of broadband Internet access and

access to the fixed network.

By developing new generation networks and by fully or partially replacing twisted copper

pairs with optical fibre, HT might, without regulation, apply delaying tactics by not providing

wholesale service of unbundled access to the local loop, that is, the service of unbundled

access to the PTP fibre loop while at the same time offering more quality and equivalent

services based on new generation networks at the retail level. In this manner, HT might have

the possibility to profit from the first mover advantage at the retail level before the

introduction of the adequate wholesale services because it would be the only operator able to

offer more advanced services of better quality to a large number of users thus leveraging its

market power from the wholesale to the downstream retail market. Such behaviour would

strengthen HT’s market position in a related retail market which might eventually lead to the

restoration of monopoly.

6.4.2.3. Undue requirements

Undue requirements refer to all those terms in the contract on access to the unbundled local

loop which are unnecessary for the provision of the service in question. Such requirements

unreasonably increase costs and waste time of the current and potential competitors using the

wholesale service to provide services at the retail level where they compete with the retail arm

or an affiliated company of the operator with significant market power. The SMP operator

might, without regulation, abuse various forms of undue requirements to influence business

decisions and costs of the current and potential competitors.



56

The Agency thinks that HT, as the SMP operator on the market of wholesale (physical)


and a vertically integrated operator, might, without regulation, impose various forms of undue

payment securing instruments in terms of conditions and the amount on operators using or

intending to use the HT’s wholesale service for the provision of services at the retail level

where they compete with the retail arm or the affiliate company of the SMP operator. It might

also unduly encourage the using of more expensive technologies (e.g. type of wiring) for the

provision of the wholesale service or impose the selection of contractors for the realisation of

collocation space, in order to increase costs of the existing and potential competitors, which

would lead to vertical leveraging of HT’s market power to the downstream retail market.

HT might also ask for information necessary for the provision of the wholesale services, such

as, for example, information about target end users, but more than necessary, that is,

information which is not economically and technically justified for the provision of this

service. Such information about end users might be used by HT to design such a service that

would attract this end user and again result in the market power being leveraged to the related

retail market and to the strengthening of HT’s market position.

.

6.4.2.4. Undue use of information about competitors

This refers to all possible behaviours of the SMP operator in which the operator uses data

provided by the potential and existing competitors at wholesale or retail level in the context of

provision of wholesale services and to the use of such information to increase rivals’ costs or

decrease earnings in a vertically related wholesale or retail market.

Without regulation, HT might ask for certain information from its potential or current

competitors and use them for the benefit of its retail arm or affiliated companies by preparing

special terms for certain end users in order to motivate them not to change the operator, which

might lead to a reduction in retail income of competitors because the end users will give up

the idea of switching or to the increase of competitors’ costs (for example, additional

marketing costs to attract users).

In this manner, HT would be in advantage before other competitors by abusing its significant

market power on the wholesale market which is the subject of this document and extend it to

the downstream retail market and in this manner, eventually, cause the increase in costs of

other operators, business problems and a probable withdrawal from the market

6.4.2.5. Quality discrimination

Competition problems by means of quality discrimination may occur in cases in which an

operator with significant market power influences the raising of costs of the existing or

potential competitors or the restriction of sales at the retail level by placing them at a quality

disadvantage. Without regulation, an operator with significant market power might use quality

discrimination by supplying a wholesale service necessary for the provision of a retail service

with quality parameters lower than the service supplied to its retail arm or affiliated

companies.



57

By means of quality discrimination, an operator having significant market power has a direct

influence on the quality of service provided to end users. Since the user is particularly

sensitive to the quality of service, this results in dissatisfaction and the loss of confidence of

end users in the operator providing the service. Furthermore, the quality of service is an

important factor in the optimization and rationalisation of an operator’s costs.



and a vertically integrated operator, might, without regulation, in different ways influence the

quality of services and the removal of possible malfunctions in the provision of the relevant

wholesale service and related contents (e.g. access lines, transfer cables, power supply etc.).

HT, might, thus delay with the repair of malfunctions in the provision of the service of

unbundled access to the local loop or sub-loop regardless of the applied technology.

Furthermore, if the service is provided to the end user by means of a cable which may not

ensure the adequate quality, and the user is complaining about the quality of the service,

without regulation, HT might re-establish the service of better quality by replacing cables

sooner if it was its own user than in case of the user using the service of another operator on

the basis of HT’s wholesale service.

Such behaviour leads to the following consequences: the existing or potential competitors lose

the confidence of end users, which might result in the termination of contracts and the lower

profits of operators on the retail market. As a result, HT might extend its significant market

power and strengthen its position in a vertically related retail market, which would lead to the

lack of effective competition at a disadvantage of end users.

.

6.4.2.6. Other types of discrimination currently defined in the Annex to the Reference

Offer for the service of unbundled access to the local loop

According to the Agency, this kind of discrimination includes discrimination in relation to

technical requirements or management or maintaining the access service. The Agency thinks

that HT might, without regulation, be able to discriminate competition in other ways currently

defined in the Annex to the Reference Offer of for the service of unbundled access to the local

loop.

Although the previously mentioned types of discrimination have not been mentioned among

the 27 standard competition problems which have been identified in practice according o the

ERG document (06) 33, the Agency thinks that, without regulation, HT would be able to

discriminate other operators in other non-price related ways.

6.4.3. Leveraging by means of pricing

6.4.3.1. Price discrimination

This competition problem refers to a situation in which an operator with significant market

power charges a different price for a wholesale service necessary for the provision of a certain

retail service to its retail arm and affiliated companies than to the existing and potential

competitors in a related retail market.

.



58



and a vertically integrated operator, might, without regulation, by means of price

discrimination, offer the wholesale service of unbundled access to the local loop or sub-loop

(regardless of the applied technology) to rival operators in a related retail markets by charging

them a price which is higher than the price charged to its retail arm or affiliated companies..

Such HT’s behaviour might influence business results of other operators using the wholesale

service in question to provide broadband Internet access services and fixed access services on

a related retail market

By charging a price which is higher than the one charged for the same service to its retail arm

or affiliated companies, HT might extend its market power to a vertically related retail

market. In other words, this would allow HT to supply the service at a certain retail price

through its retail arm or affiliated companies. In this case, in order to be competitive, other

operators would have to supply the same service at the same, or even lower, price in which

case they would not be able to make profit and in some cases they would not even be able to

cover retail costs in addition to wholesale costs. In other words, the level of retail prices that

other operators would have to compete with together with the set wholesale prices would lead

to a price squeeze, that is, it would in the long run result in the lack of effective competition

and withdrawal of other operators..



59

6.4.3.2. Cross subsidisation

This competition problem refers to a situation in which there are two different markets and

two different prices in these markets. Without regulation, the SMP operator may, in the

market in which it has this position, charge a price above costs in order to be able to offer

below-cost retail prices. This would result in price squeeze and, consequently, lead to the

leveraging of significant market power from the wholesale market to the downstream retail

market.

The Agency thinks that HT, as the operator having significant market power on the market of


access) at a fixed location and a vertically integrated operator, might, without regulation, offer

the wholesale service of unbundled access to the local loop or sub-loop (regardless of the

applied technology) above costs and thus and thus increase costs of operators using this

service while at the same time offering broadband Internet access service and access to fixed

network at below-cost retail prices.

Such HT’s behaviour would lead to price squeeze and make other operators using the relevant

wholesale service to suffer losses in order to be able to provide services at downstream

markets and this would, eventually, force them to withdraw from the market. On the other

had, HT would be able to extend significant market power from the market of wholesale


fixed location to the downstream retail market and strengthen its market position, which

would have a negative impact on effective competition



60

7. Regulatory Obligations of the SMP Operator

Should the Agency, in the process of identification and analysis of the market referred to in

Article 54 of the ECA, establish that the market is not effectively competitive, it shall adopt a

decision determining the operator with significant market power in this market pursuant to

Article 55 of the ECA. By this decision it shall impose, keep or amend certain regulatory

obligations referred to in Articles 58 to 65 of the ECA. These obligations are the following:

• Obligation of transparency

• Obligation of non-discrimination

• Obligation of accounting separation

• Obligation of access to, and use of, specific network facilities

• Price control and cost accounting obligations

• Regulatory control on retail services

• Minimum set of leased lines

• Carrier selection and pre-selection

The Agency shall impose regulatory obligations on the operator having significant market

power on the basis of the existing and potential competition problems defined in Chapter 6 of

this document in order to prevent the SMP operator from abusing the position of significant

market power and from influencing effective competition as defined in Chapter 6 of this

document..

Regulatory obligations imposed pursuant to the ECA must be based on the nature of the

identified market problem, and must be proportionate and justified considering the regulatory

principles and objectives referred to in Article 5 of the ECA. The Agency must impose at least

one regulatory obligation on every SMP operator.

The Agency thinks that the principle of proportionality would be best satisfied if every SMP

operator is imposed those regulatory obligations that will best serve to eliminate the existing

and potential competition problems, that is, that every SMP operator is imposed the obligation

it deserves on the basis of its significant market power.

7.1. Regulatory obligations imposed on the SMP operator on the market of

wholesale (physical) network infrastructure access (including shared

or fully unbundled access) at a fixed location

Having identified and elaborated in detail in Chapter 6.4 all possible competition problems

that might occur, without regulation, on the relevant market of wholesale (physical) network

infrastructure access (including shared and fully unbundled access) at a fixed location in the

time period covered by the analysis, the Agency will in the following text impose those

regulatory obligations that, according to the principles of ex-ante regulation, it deems best for

the solution of the mentioned competition problems pursuant to Article 56, paragraph 3 of the

ECA



61

On the market of wholesale (physical) network infrastructure access (including shared and

fully unbundled access) at a fixed location the Agency shall impose the following regulatory

obligations on the company HT as the operator with significant market power:

• Obligations of access to, and use of, specific network facilities;

• Obligation of non-discrimination;

• Obligation of transparency together with the obligation to publish the reference offer

for the unbundled access to the local loop and related facilities;

• Price control and cost-accounting obligations;

• Obligation of accounting separation.

7.1.1. Obligation of access to, and use of, specific network facilities59

The Agency may, in accordance with the provisions of Article 56 of the ECA, impose on

operators the obligations to satisfy the justified requirements for access to, and use of, specific

network facilities and the related infrastructure and equipment. The Agency may impose this

obligation particularly where it considers that denial of access or any other unreasonable

terms and conditions or restrictions having a similar effect would hinder the emergence of a

sustainable competitive market at the retail level, or would not be in the end-user’s interest.

The Agency may also specify additional requirements concerning the fulfilment of the

principles of fairness, reasonableness and timeliness.

The Agency thinks, as it was described in Chapter 6.4.1 of this document, that denial of

access or any other unreasonable terms and conditions or restrictions having equivalent effect

would hinder the emergence of a sustainable competitive market at the retail level, or would

not be in the end-user’s interest.

The Agency has also, on the basis of reports of violations of the provision of the relevant

reference offer and numerous other complaints of operators and end users on the market,

established that alternative operators are faced with many difficulties in practice (e.g.

preventing access to information about the existence of a device for multiple use of twisted

copper pair in the access network, calculating additional dependent costs, calculating

unreasonably high material costs, manner of charging power use, unfounded denial of

requests for access to the unbundled local loop, that is, without adequate tests, delay with the

unbundling of loops, delay with removing malfunctions, delay with establishing collocations,

that is, with dealing with consumer complaints), which is another reason for the imposition of

this obligation to create effective competition

For that reason, the Agency thinks that it is necessary to, in order to avoid the behaviour of

SMP operators defined in Chapters 6.4.1 and 6.4.2.2 of this document and all similar

problems which have not been explicitly defined, impose on HT the obligation to satisfy the

due requirements for access to, and use of, specific network facilities and the related

infrastructure. For the purpose of imposing this obligation and pursuant to Article 61,

paragraph 3 of the ECA, the Agency imposes on HT the following:

• To allow to a third party unbundled access to the local loop and sub-loop covered in

the market definition referred to in Chapter 4.3 of this document, and access to related

facilities necessary for full and shared access to the local loop, or, sub-loop;

59

Article 12 of the Access Directive



62

• to negotiate in good faith with operators requesting access and, as part of this

obligation, to reply to every reasonable request;

• not to withdraw the already granted access to facilities;

• to ensure the sharing of space or some other forms of sharing of electronic

communications infrastructure and associated facilities, including, in particular, the

sharing of cable ducts, buildings and other facilities and their entrances;

• to provide access to operational support systems or similar software systems necessary

to ensure fair competition in the provision of services.

When imposing obligations referred to in Chapter 61, paragraph 3 of the ECA, as part of the

obligation to provide access, the Agency has made sure that the mentioned obligations are

proportionate to the regulatory principles and objectives referred to in Article 5 of the ECA,

that is, it has taken into account the criteria laid down in article 61, paragraph 5 of the ECA.

The Agency thinks that, considering the level of market development, the service of

unbundled access to the local loop and all other proposed obligations are technically and

economically completely feasible taking into account operator’s available capacities. Thus,

for example, when imposing the obligation to provide the service of fully unbundled access to

the local loop and the local sub-loop, Agency has considered whether this obligation is

technically and economically feasible and it has taken into account the available capacity,

which was supported in the text of the analysis of the relevant market.

The Agency also thinks that long-term protection of competition is ensured by means of rights

and obligations of all operators on the market prescribed in the ECA and other laws and

bylaws (e.g. ordinances, Civil obligations Act) and in reference offers. Every operator thus

has an equal chance to recover initially invested funds after a certain period of time, which is

obvious in the imposition of service of unbundled access to the fibre-based local loop where

the Agency recognised that the wholesale price for unbundled access to the fibre-based local

loop must, in addition to the cost, contain a reasonable rate of return, pursuant to Article 56,

paragraph 3 of the ECA.

In order to resolve the problems described in Chapter 6.4.1 of this document, pursuant to

Article 61, paragraph 3, items 1 and 2 of the ECA, the Agency has imposed on HT the

following obligation:

• to give to other operators access to the unbundled copper-based local loop and sub-

loop and access to unbundled fibre-based local loop based on the point-to-point link

and access to associated facilities necessary for full or shared unbundled access to the

local loop, or sub-loop;

• to negotiate in good faith with other operators requesting access in the manner that it

has to reply to every reasonable request.

HT must assess whether the request is reasonable in accordance with the obligation of non-

discrimination which is also dependent on technical characteristics of its own network.

Access to the unbundled local loop must be provided in two ways:

1. HT must in those locations where it unbundled the local loop for the purpose of self-

supply, that is, where it installed its outside cabinet, while preserving network

integrity, ensure space for the realisation of the service of unbundled access to the

local sub-loop, meaning that HT must ensure space for the termination of the

operator’s intermediary cable. This is equivalent to ensuring space on MDF in case of



63

service of unbundled access to the local loop. In the vicinity of HT’s cabinet, the

operator may install its own street cabinet in accordance with all previously obtained

approvals and licences. The operator must also ensure the connecting of the mentioned

street cabinet to the power supply network in order to charge its active equipment

(VDSL2 transfer technology) installed in the cabinet. The operator must also ensure

the connecting of the mentioned equipment to its core network in which case HT must

ensure the sharing of ducts, that is, it must allow access to the street cabinet or some

other concentration point via telecommunications distribution channels pursuant to

Article 30 of the ECA and the Ordinance on the manner and conditions of access to

and use of electronic communications infrastructure and associated facilities60

. If there

is no space in ducts, HT must lease dark fibre to the operator. If there is no available

dark fibre, HT should ensure access on the basis of wavelength (WWDM access) over

fibre used by HT for self-supply in order to connect the operator’s active equipment to

the network.

2. HT must allow the operator to, on the basis of its business decisions based on

expertise to install a street cabinet at some point of HT’s access network although HT

does not have or does not plan to install its street cabinet on that same point. The

location where the operator will install the street cabinet must comply with technical

requirements, and the equipment to be installed in the mentioned cabinet must

completely ensure network integrity, that is, it may not cause the degradation of

services provided from the local exchange.

In this manner preconditions will be created for some users to get the type of broadband

services they would not otherwise be able to get, and this will ensure the expansion of the

offer of broadband services to a greater number of users, stimulate investments into the access

segment of the network and contribute to further liberalisation of the electronic

communications market in the Republic of Croatia. Therefore, in cases when the replacement

of the twisted copper pair by optical cable in the access part of the network is not

economically justified, it is to be expected that the introduction of new broadband services

will be based on the concept of the shortening of the twisted-pair copper wire or twisted-pair

cable and the replacement by optical cable to the street cabinet or some other concentration

point, which will allow other operators to use this concept and, whilst preserving network

integrity, offer more advanced, quality and innovative broadband services where it is

economically justified. All related costs and all necessary approvals and licences for the

building of the cabinet are borne by the operator who applied for such an intervention in the

access network. This is a way of allowing users with long local loop to use quality broadband

services. The Agency thinks that, if this issue is not regulated in the appropriate manner,

significant transmission capacity will remain unused and many users will not be satisfied with

the quality of offered services.

The Agency has also imposed on HT, pursuant to Article 61, paragraph 3, item 3 of the ECA,

the obligation not to withdraw the already granted access to the local loop because the

withdrawal of the already granted access could result in damage and increase in costs of

operators using the service of unbundled access to the local loop and, eventually, to the

leveraging of HT’s significant market power to the downstream retail market.

60

OG 154/2008



64

Furthermore, HT may not withdraw the already granted access unless the operators have

agreed upon some form of migration. In case of lack of agreement between operators, HT

must notify the operators and the Agency at least five years in advance the intention to

completely remove the existing access network so that the operators could have enough time

to plan alternative access to the end user. This is necessary to preserve the continuity of

service provision by the operator and the possibility of the operator to continue competing in

the market and in the NGA environment.

Furthermore, the Agency imposes on HT, pursuant to Article 61, paragraph 3, item 6 of the

ECA, the obligation to ensure collocation and other forms of sharing of electronic

communications infrastructure and associated facilities, including, in particular, the sharing of

ducts, premises and other buildings and their entrances.

Since the service of collocation is a precondition for access to the unbundled local loop61

, HT

must ensure the collocation and other capacities necessary for adequate installation and

connecting of the relevant equipment enabling the use of the service of unbundled access to

the local loop. Collocation means the provision of the service of leasing of physical space and

technical facilities necessary to reasonably accommodate and connect the relevant equipment

of the beneficiary to be able to use the service of unbundled access to the local loop. The

service of collocation allows an operator to access a certain unbundled local loop at requested

locations of the main distribution frame in the manner that the operator accommodates the

necessary equipment for distribution or concentration of traffic. In accordance with the above-

mentioned obligation, HT must allow beneficiaries to choose the type of collocation whereby

HT must take into account requests of operators which may be denied only on the basis of

justified and transparent reasons. The provision of collocation services will depend on the

availability of space in HT’s premises, or, on HT’s land.

HT currently provides the service of collocation that will allow beneficiaries the unbundled

access to HT’s local loop at requested locations of HT’s main distribution frame in one of the

following ways:

1. Physical collocation:

• In separate collocation premises in the building of HT’s main distribution

frame,

• Outside the building in a street cabinet but on HT’s land where HT’s main

distribution frame is located, and

• In the room of HT’s main distribution frame (under special safety

requirements);

2. Distant collocation – collocation in premises or street cabinets which have been

installed or rented by the beneficiary on public or private property near the location of

HT’s main distribution frame;

Virtual collocation – collocation at HT’s premises, and in this case HT is the only one that

is authorised to accommodate, install, maintain and run the beneficiary’s equipment

necessary for the service of unbundled access to the local loop, and the beneficiary is not

authorised to access the relevant equipment .

Since the Agency imposed on HT the obligation not to withdraw the already granted access to

equipment, HT must still continue to offer this type of collocation. If physical or virtual

collocation requested by the beneficiary is not possible at the requested location of the main

61

Covered by the market definition referred to in Chapter 4.3 of this document.



65

distribution frame, HT may refuse the operator’s request for physical or virtual collocation but

in this case, HT must offer to the beneficiary the use of distant collocation.

Furthermore, HT must provide the service of collocation for the purpose of access to the local

sub-loop under conditions which are equivalent to those in case of the service of unbundled

access to the local loop. Also, in case of collocation for the purpose of access to the local sub-

loop, as it was already mentioned in this Chapter, HT must ensure the sharing of ducts, that is,

provide access to the street cabinet or some other concentration point via distribution channels

pursuant to Article 30 of the ECA and the Ordinance on the manner and conditions of access

to and sharing of electronic communications infrastructure and associated facilities. If there is

no space in ducts, HT must rent dark fibre to the beneficiary. If there is no available dark

fibre, HT must ensure access on the basis of wavelength (WWDM access) over fibre used by

HT for self-supply and for the purpose of connecting the beneficiary’s active equipment to the

network. The ensuring of access to the sub-loop will allow those operators who are building

their own networks to get even closer to the end user thus stimulating network investments. In

this manner, the Agency wishes to increase investments into the existing network

infrastructure, that is, encourage innovations in access technology and indirectly strengthen

the development of electronic communications networks thus ensuring to end users the

possibility of choice among operators providing broadband and voice services.

Furthermore, in case of physical collocation, HT must make sure that the beneficiary has the

same source of power supply as HT itself, that is, as its affiliated companies (depending on

the availability of resources, HT will ensure the maximum energy consumption requested by

the operator). For installations connected with AC, HT should ensure equally continuous

power supply as for HT’s equipment on that location.

As part of the obligation to provide collocation, HT must offer to beneficiaries the smallest

available space for physical and virtual collocation adequate for the appropriate installation of

devices needed by the beneficiary considering its request. This obligation will prevent the

incurring of unnecessary costs resulting from the use of more space than actually needed by

the beneficiary.

Furthermore, HT must ensure to beneficiaries undisturbed access by their own intermediary

cable between the main distribution frame and the intermediate distribution frame in which

case the cable in question must be made and installed in compliance with the valid laws and

regulations in the electronic communication sector and in accordance with all relevant

recommendations of the International Telecommunications Union and the European

Telecommunications Standards Institute (ITU Recommendation L.19, IEC standard 62255),

and in order to maintain the integrity of the electronic communications networks. The

intermediary cable must have electrical characteristics equivalent to those of HT’s cable

connecting DSLAM to MDF; meaning xDSL cable construction (at least cable of type xDSL-

30 MHz), with a screen for inside installation in case of collocation in a building, that is,

outside installation in case of distant collocation. In the latter case, the cable capacity should

not exceed 300 pairs. The contractor and the equipment may be selected by the beneficiary

himself while HT is responsible for supervision over works. The beneficiary will be

responsible for the functioning of its transmission capacities and equipment and the for the

functioning of services in this new system, and the beneficiary must take justified and

necessary steps in its operational and implementation procedures to ensure that the system:

• Does not endanger the safety and health of employees or end users of the other party

or of third parties,



66

• Does not damage, disturb or cause the deterioration of quality in the functioning of the

system of the other part or of third parties.

The Agency finds this obligation necessary to prevent the leveraging of HT’s significant

market power to the downstream retail market because in this manner operators have the

possibility of choice among several options and thus may influence their own costs. This also

prevents the linking of collocation services with HT’s exclusive right to procure, deliver and

install the intermediary cable. The Agency thinks that this measure is justified on the market

since HT, when connecting operators who have their own collocation space, used to charge

them costs which were not proportionate to the real price of cables, and to the prices of the

related works. In this manner the Agency is trying to prevent the incurring of unnecessary

costs to other operators, or, in other words, behaviour described in Chapter 6.4.2.3 of this

document, concerning undue requirements and, thus consequently ensuring the increase of

competitiveness on the retail market.

Furthermore, for all works on the realisation of collocation premises (installation of cables)

for which HT uses external contractors, HT must allow the operator to choose the contractor

(HT’s contractor or some other contractor) on the basis of its own business decisions. If the

operator employs its own contractors, an HT’s employee will supervise the works. For all

works carried out by HT’s employees in case of realisation of collocation premises HT must

publish the price list of the relevant works in its reference offer to make the prices transparent

to all operators paying for the preparation of and putting at the disposal of collocation

premises. The prices charged by HT for the provision of the service of access to the

unbundled local loop and the related facilities must be in compliance with the principles of

transparency, non-discrimination, objectivity and cost-orientation and they must be based on

actual costs of provided services, including a reasonable rate of return on investments. HT,

who is responsible for providing the service of access to the local loop, shall be responsible

for proving that the prices are justified.

Pursuant to Article 61, paragraph 3, item 8 of ECA, the Agency also imposes on HT the

obligation to grant access to operational IT support system in accordance with international

standards, via a WEB interface with the adequate security protection and regular 2-hour

updating of the status, which allows access to the following information:

• information system for the monitoring of requests of beneficiaries for the service of

unbundled access to the local loop (successful unbundling of the local loop, denial of

unbundling of the local loop),

• requests of operators to repair a malfunction, status and the status of escalation of the

repair of other operator’s malfunctions;

• information concerning the provision of the service of collocation;

• information on invoicing for services provided to other operators;

• information on the existence of secondary equipment for multiple use of the twisted

copper pair in HT’s access network (information whether an individual pair is realised

with active equipment or not).

In accordance with Article 61, paragraph 4 of the ECA, in relation to the imposed obligations,

the Agency imposes on HT additional requirements concerning the fulfilment of the

principles of fairness, reasonableness and timeliness. Therefore, the Agency imposes on HT

the obligation to ensure the basic level of the SLA service, among other things, the



67

compliance with the following deadlines when providing the service of unbundled access to

the local loop and related facilities, in the following manner::

• HT must consider every received request for concluding the contract which is

prepared in accordance with terms and conditions of the reference offer and conclude

a contract with the beneficiary within 15 days from the receipt of the request;

• HT is obliged to negotiate with the beneficiary on the resolution of the request for the

conclusion of the contract on access to the unbundled local loop. If agreement on

access to the unbundled local loop between HT and the beneficiary is not reached

within 30 days from the receipt of the request for the conclusion of the contract on

access to the unbundled local loop, operators involved in negotiations on access to the

unbundled local loop may address the Agency;

• If HT concludes that the received request for unbundling of the local loop does not

contain all the necessary data, it shall, within 5 working days, request from the

beneficiary to amend the request;

• HT must ensure to the beneficiary access to the unbundled local loop within the

maximum of 10 working days from the date of receipt of a complete request for the

unbundling of the relevant local loop. The existing local loop which is currently not

used shall be realised within 20 working days from the date of receipt of the complete

request for the unbundling of an individual local loop. A newly realised local loop

must be marked with a designation referring to a certain beneficiary and bearing the

ID of the unbundled local loop;

• In case of a request for full unbundled access to the local loop and number portability

request of a certain subscriber, which require access to the unbundled local loop, HT

must harmonise the dates of realisation of both services taking into account the time

limits for both services;

• Upon request of a beneficiary who already has implemented the collocation for the

service of unbundled access to the local loop at the location of the local

interconnection access point, HT shall immediately provide collocation for

interconnection services with the existing leased space in the collocation which is used

for the service of unbundled access to the local loop, the already installed

telecommunications cabinet and the existing power supply and air-conditioning may

being used for the purpose of interconnection. In this case of provision of collocation

for the interconnection service at a location where there already exists collocation for

the service of unbundled access to the local loop, the beneficiary shall be fully

responsible for the interruption in the service of interconnection resulting from the

interruption of power supply of the beneficiary’s equipment;

• Upon request of the beneficiary, HT must offer the air-conditioning of the collocation

premises with an additional compensation. In its request the operator must indicate the

power dissipation of its equipment and the expected dissipation in case of upgrading

of the equipment. HT must, within 15 days from the submission of the request of the

beneficiary, deliver a request for the installation of air-conditioning into collocation

premises. HT must, within 30 days from the receipt of the accepted offer of the

beneficiary, install air-conditioning into collocation premises. The beneficiary must be



68

allowed to choose, on the basis of its own business decisions, the supplier of air-

conditioning equipment and the contractor who will install this equipment under

supervision of HT’s employee. In this way the Agency is trying to prevent the

charging of unnecessary costs to other operators and thus ensure more competition on

the retail market;

• HT will reply in writing to the former request for data on the local loop within 6

working days after the receipt of the request. In the reply, HT will inform the

beneficiary on the availability, length, technical characteristics (diameter of

conductors, type of insulation, work capacity, structure per segments if the local loop

is not homogenous, and the usability factor for the used cable) for each requested local

loop separately;

• In order to ensure the continuity of its own business operations on one hand and to

support the processes of the beneficiary on the other, HT shall provide to the

beneficiary, upon the beneficiary’s request, within 15 days from the receipt of the

request in question, access to IT operational support systems in accordance with

international standards;

• The maximum time allowed for the repair of malfunctions is two days (48 hours) from

the moment when the repairing has started. For the purpose of more efficient and more

effective repair of malfunctions, HT must establish an adequate procedure for repairs

and a system of measuring and testing the unbundled local loop that will guarantee

complete transparency and non-discriminatory behaviour in procedures and processes

for repairing beneficiary’s problems. The procedure and a detailed description of the

repair process that must be applied by HT from 1 October 2009 have been prescribed

in a special instruction – Instruction on the removal of interferences in case of service

of unbundled access to the local loop – that will be subsequently adopted by the

Agency and make a constituent part of the reference offer;

• HT must immediately inform by electronic means the beneficiary of the repair of the

reported malfunction/interference, and deliver a detailed description of the

malfunction and the repair process. HT must prove that the malfunction is not HT’s

responsibility but the beneficiary’s responsibility. The Agency finds the imposition of

this obligation necessary because the beneficiary will, on the basis of the repaired

malfunction/interference proceed with activities towards the end user. If HT fails to

notify the beneficiary of the repair of the malfunction/interference, this means that the

beneficiary must delay the repair of malfunction/interference towards the end user due

to denial of information, which, finally, leads to the fall of its competitiveness on the

retail market;

• Before the conclusion of the contract on the use of the service of unbundled access to

the local loop with HT, the beneficiary may ask from HT in writing to provide

information on locations of the main distribution frame intended for the service of

unbundled access to the local loop provided that the beneficiary submits a signed

statement of confidentiality. HT shall, within 5 working days from the receipt of the

original request, deliver the following information in writing:

o Geographical position of the requested main distribution frame,

o Number of channels per location of the main distribution frame,

o Dialling code of the public switched telephone network,



69

o Geographical coverage per individual HT’s main distribution frame in the form

of maps or an index of streets covered by an individual HT’s main distribution

frame.

• HT must consider every received request for collocation or extension of collocation,

which contains all data and has been prepared in accordance with the conditions from

the reference offer, and it must deliver a written offer for a collocation or for the

extension of collocation to the beneficiary within 30 days from the receipt of the

request. HT will deliver to the beneficiary an itemised collocation offer and/or offer

for the extension of a collocation in writing if the collocation and/or extension of

collocation is possible in accordance with the beneficiary’s request or a written

notification why the requested collocation and/or extension of collocation is not

possible at the desired location, and, within 15 days from the date of denial of the

request, it shall deliver to the beneficiary a detailed explanation of reasons for denial,

and, if it is technically feasible, propose a different kind of collocation. The copy of

the letter of denial shall be submitted by HT to the competent regulatory authority;

• If the request for collocation is denied because collocation or sharing of equipment is

not available at the moment of submission of the beneficiary’s request for collocation

because HT is no longer able to provide access to this equipment and/or premises due

to obligations arising from previously concluded contracts with other beneficiaries,

HT must, within 10 days from the receipt of the request, submit to the beneficiary the

notification of denial. HT will, provided that it is technically feasible, submit to the

beneficiary, in addition to a detailed explanation why the request was denied, a

proposal for another type of collocation or sharing of equipment within 15 days from

the date of denial of the request. If a beneficiary accepts another type of collocation or

sharing of equipment within 30 days at the latest, HT shall within 5 days from the

receipt of the notification of acceptance of the proposal for another type of collocation

or sharing of equipment, deliver the relevant offer;

• The beneficiary must, within 30 days from the receipt of the offer for collocation,

inform HT in writing of the acceptance or refusal of the offer;

• The time limit for the establishment of collocation shall depend on the type of

collocation (physical, distant or virtual), but this time limit may not exceed 60 days

from the date of receipt of the notification of the beneficiary on the acceptance of the

offer for collocation or, in case of the establishment of the extension of collocation,

the time limit shall not exceed 30 days from the receipt of the beneficiary’s

notification of acceptance of the offer for the extension of collocation, provided that

the beneficiary has already paid or submitted a security instrument. If the installation

of collocation equipment and/or building of collocation premises require a building

permit, the time limit shall start from the date when the building permit becomes final.

Within the maximum of 15 days from the receipt of the notification of acceptance of

the offer, HT and the beneficiary shall sign a contract on the provision of collocation

services that will cover all collocations agreed between HT and the beneficiary,

together with the marked deadline for the deliver of the selected security instrument.

Within the maximum of 5 days from the date of receipt of the signed contract on the

provision of collocation services, HT shall issue to the beneficiary a pro forma invoice

for the agreed collocations. The deadline for the payment of the pro forma invoice for



70

agreed collocations shall be 8 working days from the date of issue of the pro forma

invoice by HT;

• HT must, upon the beneficiary’s request, ensure identical forms of power supply at

collocation premises to those provided for self supply and for its affiliated companies;

• HT must, upon the beneficiary’s request, ensure virtual collocation where the building

of physical space is not necessary, and devices are accommodated in the existing HT’s

premises;

• If there is no fee space for physical collocation, HT must, upon the beneficiary’s

request, enable the linking with a distant collocation which is the responsibility of the

beneficiary;

• HT must, upon the operator’s request, install, within 4 months, control electricity

meters for measuring the actual power consumption by beneficiaries at existing

collocation premises (including a special meter for electic power consumed by air-

conditioners installed in collocation premises) in which case the prices must be based

on actual costs. The beneficiary must also be allowed to choose a supplier of meters

on the basis of own business decisions, and the contractor who will install the meters

in the main distribution cabinet in collocation premises. HT must be informed thereof

on time. In this way, the Agency is trying to prevent the charging of unnecessary costs

to other operators, that is, the behaviour described in Chapter 6.4.2.3 of this document

and thus ensure more competition on the retail market;

• HT must charge the consumed power at a price that it pays to its own supplier;

• HT must, within 90 days from the date of handing over of collocation premises, adjust

the advance payment for the preparation of collocation premises and putting at

disposal by reimbursing to beneficiaries the overpaid amount. When assessing the

total costs in the offer for collocation services, HT must use unit prices of materials

from the accounts receivable of its official financial system on the date of preparation

of the offer. Since this is the assessment of costs of preparation of collocation premises

and putting them at disposal, the Agency thinks that this obligation must be imposed

in order to harmonise the paid expenses with actual costs of preparation of collocation

premises and putting at disposal, in order to protect the interests of HT and the

beneficiary. Since beneficiaries base their business plans, among other things, on the

relevant wholesale costs, this will help avoid that HT, by generating one-off

(unjustified) costs for the beneficiary, influences the beneficiary’s decision concerning

the collocation service offer and hinders market liberalisation. Collocation services are

a necessary precondition for the use of the service of unbundled access to the local

loop which allows the beneficiary to offer its own services to its users.

In the existing RIO, HT has prescribed obligations towards operators in relation to the service

of unbundled access to the local loop. These obligations are, for example, the deliver of

services of collocation/extension of collocation, deliver of access to the unbundled local loop,

repair of malfunctions, and, consequently, certain fees in case of violation of these obligations

have also been defined (failure to comply with deadlines). Although the deadlines for the

delivery already make a constituent part of HT’s reference offer, the Agency thinks that they

must be included in the obligations imposed on HT to ensure that the obligations are fulfilled.

By delaying the fulfilment of obligations laid down in Article 56, paragraph 2 of the ECA, HT



71

would be in position to restrict the entry of new operators on the market and influence the

business operations of the existing operators because they largely depend on HT’s behaviour

for their business. In this case, end users of operators using HT’s services would suffer and

thus lose confidence in the quality of service of competitors at their disadvantage and at the

advantage of HT. The disturbing of operators by not fulfilling obligations within reasonable

time limits might also be reflected in delays with the processing of questions or ensuring the

collocation services, and by stalling the repair process. Therefore, the Agency thinks that the

imposition on HT of the obligation to pay a penalty in case of delay would encourage this

operator to fulfil its obligations within the defined time limits, and prevent possible HT’s

behaviour described in Chapter 6.4.2.2 of this document.

As a result, the Agency imposes on HT the time limits for the delivery of service and

penalties in case of delay with the delivery of services in relation to obligations imposed on

HT in order to force HT to respect the time limits and to enable operators to timely provide

services to the end users. The Agency imposes only penalties in case of delay with the deliver

of services referring to basic obligations related to the provision of services, while fines for

non-compliance with other time limits have been imposed in accordance with the ECA

provisions. Therefore, the Agency imposes on HT the following penalties in case of delay

with the delivery of services:

• HT must, for every local loop where there is no need to work at end user’s premises,

pay a penalty for every day of delay with the delivery of an individual local loop in the

following manner: for the first 10 days the contractual fine amounting to 50% of the

monthly fee for the use of the unbundled local loop per each individual day of delay,

and 150% of the monthly fee for the use of the unbundled local loop for each

individual day from the 11th

day of delay;

• If HT does not deliver to the beneficiary the collocation offer within the prescribed

time limit, it must pay to the operator HRK 500.00 per day for the first 10 days of

delay, and HRK 1,000 per day from the 11th

day of delay on;

• HT must pay to the operator for every day of delay wtih the realisation of collocation a

delay penalty, more precisely, for the first 10 days of delay it must pay HRK 500 to

the operator for every day of delay, and from the 11th

day on, HRK 2500 for every day

of delay;

• In case of delay with the repair of malfunctions within 48 hours from the expiry of the

maximum time envisaged for the repair of the malfunction, HT must pay to the

operator a penalty amounting to one monthly fee for the use of the unbundled local

loop and for the delay exceeding 48 hours from the expiry of the maximum time

envisaged for the repair, an additional 20% of the monthly fee for the use of the local

loop per a day of delay (starting from the date of expiry of the maximum time allowed

for the repair of a malfunction)

Concerning penalties in case of delay with the delivery of services it must be emphasised that

they already are a part of the Reference Offer for the service of access to the unbundled local

loop. The penalties for every day of delay with the delivery of the individual local loop that

amounting to 50% of the monthly fee for the use of the unbundled local loop per a day of

delay for the first 10 days the contractual fine, and 150% of the monthly fee for the use of the

unbundled local loop for each individual day from the 11th

day of delay have been increased



72

compared to the currently valid ones in order to force HT to deal with access problems in the

adequate and most efficient way. It must be mentioned that in case of delay in the delivery of

an individual local loop, the beneficiary has, in addition to the real damage, the damage in the

form of lost profits since continuous delays with the delivery of individual local loop damage

the operator’s credibility.

The mentioned time limits for the provision of the service of unbundled access to the local

loop and related facilities and the penalties in case of delay with the delivery of the service

may be amended by the Agency in the procedure for the amendment of the reference offer for

unbundled access to the local loop and related facilities, if it finds it necessary in order to

encourage competition, that is, to prevent the distortion or hindering of competition in the

electronic communication sector.

In order to ensure the application of the basic level of SLA, the Agency imposes on HT the

obligation to publish performance indicators on a quarterly basis or upon the Agency’s

request as elaborated in detail in the section on the obligation of transparency. Furthermore,

the Agency also imposed the obligation on HT to, in accordance with the obligation of non-

discrimination62

, notify the Agency of all advanced SLA provided by HT to other operators

on the basis of commercial agreements for its retail arm or to its affiliated companies. In this

manner the Agency wishes to establish whether HT has ensured equivalent conditions in

equivalent circumstances to other undertakings providing equivalent services, or, in other

words, whether HT provides, in case of advanced SLA, such a level of SLA to one operator

for a certain price and to another operator for that same price.

Furthermore, HT must remove the restrictions prescribed in the existing reference offer that

services or parts of services which are a subject of the Reference Offer for unbundled access

to the local loop may not be ceded to third parties without HT’s prior consent. The Agency

finds this condition unnecessary because the relationship between HT and the operator using

the service of unbundled local loop will remain unchanged. In other words, the operator who

unbundled the loop from HT still has to comply with all the provisions of the relevant

reference offer since the reference offer regulates only the wholesale relationship between HT

and the alternative operator, and, in case of non-compliance, it shall be considered

responsible, and not the third party providing retail services over the unbundled local loop. It

must be mentioned that the operator using unbundled access to the local loop (lesee), who

intends to give the pair to a third party (Sub-lesee) for use must include in the mutual

agreement all possible operational activities that might occur during provision of such a

service. In other words, pursuant to the provisions of the Civil Obligations Act, Article 537,

subleasing is possible if does not cause damage to HT. Therefore, the beneficiary (lesee) of

unbundled access to the local loop is still responsible for adequate use of the service of

unbundled access to the local loop and responds to HT (lessor), e.g. all correspondence with

HT must still go through the beneficiary of unbundled access to the local loop – the reporting

of malfunctions, payment of the monthly fee etc. Considering the previously mentioned

responsibility of the beneficiary, the beneficiary must always have information about the

transfer speed provided by the sublesee over the leased pair (unbundled local loop by the

beneficiary), and fully respect the provisions defined in the Static Plan for Frequency

Spectrum Management and the Accompanying Plan for Pair Management63

.

62

The obligation of non-discrimination has been elaborated in Chapter 7.1.2. of this document. 63 The obligation to publish the „Static Plan for Frequency Spectrum Management „ with the accompanying pair

management plan has been defined as part of the obligation of transparency defined Chapter 7.1.3. of this

document.



73

However, the Agency thinks that the regulatory obligation of access to and user of specific

network facilities alone, that is, without imposing other regulatory obligations, may not

resolve competition problems identified in Chapters 6.4.2 and 6.4.3 of this document and it

therefore feels that this obligation must be supplemented by other obligations in order to

influence all existing and potential problems.

7.1.2. Obligation of non-discrimination64


operators the obligation of non-discrimination in relation to interconnection and/or access.

The subject of this document is the market of wholesale (physical) network infrastructure

access (including shared or fully unbundled access) at a fixed location, on the basis of which

the Agency shall impose on HT the mentioned obligation related to access.

An operator, who has been imposed the obligation of non-discrimination pursuant to Article

59, paragraph 2 of the ECA, must, in particular, ensure equivalent conditions in equivalent

circumstances to other undertakings providing equivalent services, and provide services and

information to others under the same conditions and of the same quality as it provides for its

own services, or for the needs of its affiliated companies.

Consequently, the Agency imposes on HT, as the operator with significant market power on

the relevant market which is the subject of this document, a regulatory obligation of non-

discrimination and, in accordance with this regulation obligation, HT must:

• Ensure equivalent conditions65 in equivalent circumstances to other undertakings

providing equivalent services;

• Provide services and information to others under the same conditions and of the same

quality as it provides for its own services, or for the needs of its affiliated companies;

• Deliver to the Agency contracts concluded on the basis of the reference offer for

unbundled access to the local loop within 15 days from their signature.

The Agency thinks that the imposition of the obligation of access66

is not by itself a sufficient

measure since HT may, despite this obligation, on the basis of certain behaviour described in

Chapters 6.4.2 and 6.4.3 of this document, ensure better conditions for doing business to itself

and its affiliated companies, thereby hindering competition at the retail level. In accordance

with this, the regulatory obligation of non-discrimination supplements the obligation of access

to prevent HT from granting access under discriminatory conditions and to create effective

competition.

By imposing a regulatory obligation of non-discrimination on HT as the SMP operator on the

market of wholesale (physical) network infrastructure access (including shared and fully

unbundled access) at a fixed location, the Agency aims at resolving all competition problems

64

Article 10 of the Access Directive. 65 Conditions, time limits, prices, information etc. 66

The Agency includes under the obligation of access the obligation of access to and use of specific network

facilities.



74

laid down in Chapters 6.4.2 and 6.4.3 of this document and all problems which have not been

explicitly defined but may result in the same consequences on the market. This regulatory

obligation will solve competition problems related to price discrimination and non-price

discrimination, which will additionally be solved by imposing a regulatory obligation of

transparency.

Furthermore, pursuant to Article 58 of the ECA, the Agency may not impose the obligation of

publication of the reference offer to SMP operators if it had not imposed the obligation of

non-discrimination along with the obligation of transparency to these operators. Based on the

above reasons, and taking into account elaborations from Chapter 7.1.3 of this document

explaining why it is indispensable for the market that HT is imposed the obligation to publish

the reference offer for unbundled access to the local loop, the Agency imposes on HT the

obligation of non-discrimination.

.

The obligation of non-discrimination will ensure that operators are entitled to equivalent

conditions of service of unbundled access to the local loop and sub-loop, equivalent price and

services and information of the same quality as that provided by HT to its own retail arm and

as that provided to its affiliated companies.

This will ensure that services and information are provided to other operators within the

defined time limits and in accordance with quality standards which are equivalent to those

conditions that HT provides to its own retail arm and as those provided to its affiliated

companies. HT must timely inform all operators with which it has concluded contracts on

unbundled access to the local loop about all planned changes on the network, that is, about all

plans to modernise the network i.e. the information must be delivered in the same manner and

of the same quality as provided by HT to its retail arm and affiliated companies.

Furthermore, as part of the obligation of non-discrimination, the Agency imposes on HT the

obligation to timely deliver to the beneficiary data on planned upgrades to the network or on

the planned opening of new points of access in relation to an individual local loop. Without

regulation, HT might deny detailed and timely information on planned network changes to

current and potential competitors, which would have a negative impact on business plans and

investments of these operators since they would not be able to react in time and adjust to the

changes, including a timely reaction at the retail level. On the other hand, HT would ensure

the first mover advantage and thus improve its own position on the retail market in relation to

current and potential competitors.

HT must also provide all the necessary information on planned network changes so that

operators using the service of unbundled access to the local loop could react in time and

adjust to the changes, including a timely reaction at the retail level. Therefore, the Agency

imposes on HT the obligation to notify operators of planned network changes at least one year

before the start of implementation of the mentioned changes. Modernisation plans for the

access network of the infrastructure operator, such as the opening of new access nodes,

redirecting of a part of the network to the new access node and the similar must be carried out

in the manner that the existing services provided by operators to their end users are not

threatened, that is, the principles of spectrum compatibility in the access network must be

completely observed.

The Agency also obliges HT to provide information on the network, on available local loops

and network upgrades in order to, by informing the operator in the same way as HT’s retail



75

arm and affiliated companies, prevent a situation in which local loops are upgraded for

broadband access only when needed by HT’s retail arm or its affiliated companies. Since HT

already disposes of an IT base of such data, the Agency thinks that this obligation is

proportionate to the goal because it prevents the leveraging of significant market power. In

this manner, other operators will be treated equally and receive equivalent information as

HT’s retail arm or its affiliated companies, to the advantage of end users.

Furthermore, HT must deliver to the Agency contracts concluded on the basis of the reference

offer for unbundled access to the local loop and the related facilities67

within 15 days from the

conclusion of the contracts. This is necessary for the Agency to be able to verify whether HT

respected the obligation of non-discrimination. In case of non-compliance with the above-

mentioned obligation, and pursuant to the obligation to deliver the contracts, the Agency

would be able to react in a timely manner.

The Agency deems that the regulatory obligation of non-discrimination is necessary to

prevent all possible discriminatory behaviour of SMP operators on the market as described in

Chapters 6.4.2 and 6.4.3 of this document. This kind of behaviour, if it occurs, would cause

the most damage to end users. The prevention of all discriminatory behaviour creates

conditions for easier market entry of all new operators, which is the goal of improvement of

competition in the retail market. This regulatory obligation ensures to all operators on the

market information, time limits, terms and conditions, quality and price of services equivalent

to those that the operator having significant market power provides to its affiliated companies

and to its own retail arm supplying the service in question..

The Agency feels that the fulfilment of the obligation of non-discrimination necessitates the

imposition of the obligation of transparency and of the obligation of accounting separation in

order to monitor the effectiveness of the obligation of non-discrimination itself.

.

7.1.3. Obligation of transparency68


operators the obligation for transparency in relation to interconnection and/or access requiring

that certain information are made publicly accessible, such as:

• accounting information;

• technical specifications;

• network characteristics;

• terms and conditions for supply and use;

• prices.

Also, in accordance with the provisions of Article 58 of the ECA, the Agency may request

from the operator, who has been imposed the obligation of non-discrimination, to publish a

reference offer that will help other operators avoid additional costs which are not necessary

for the provision of the service in question. The reference offer must be broken down into

67The obligation to publish the reference offer has been laid down as part of the obligation of transparency

elaborated in Chapter 7.1.3. 68




76

components according to market needs, and it must include the associated time limits, terms

and conditions and prices of services.

Taking into account competition problems elaborated in detail in Chapters 6.4.2 and 6.4.3 of

this document, the Agency imposes on HT, as the operator with significant market power on

the market of wholesale (physical) network infrastructure access (including shared and fully

unbundled access) at a fixed location, the obligation of transparency in relation to access.

As a result of all of the above, the Agency imposes on HT, as the SMP operator on the market

which is the subject of this document, the obligation of transparency in the following manner:

• HT must publish the reference offer for unbundled access to the local loop and related

facilities for all services comprised in the market definition given in Chapter 4.3 of

this document to ensure that other operators are not required to pay additional costs

which are not necessary for the provision of the service.

• The reference offer for unbundled access to the local loop and related facilities must

be broken down into components according to market needs, and it must include the

associated time limits, terms and conditions and prices of services;

• The reference offer must also contain a part that will define the conditions for

collocation together with time limits, conditions and prices for the provision of the

service;

• HT must deliver to the Agency detailed reports with all relevant performance

indicators every three months or on as needed basis upon the Agency’s request;

• HT must allow the Agency access to the system/database used for computing and

storing of key performance indicators - KPI

The purpose of this obligation is to ensure that all operators in the relevant market have the

possibility of insight into conditions of use of the service of unbundled access to the local

loop and sub-loop. The obligation of transparency is fully compatible with the previously

imposed obligation of non-discrimination, and it is necessary because service of unbundled

access to the local loop and sub-loop is technically very demanding. For that reason, the

obligation of non-discrimination may be implemented only if all information and conditions

necessary for the service of unbundled access to the local loop and sub-loop are transparently

presented.

Furthermore, because of the technical complexity of the service of unbundled access to the

local loop and sub-loop, access to necessary information would not be sufficient in itself,

which is why HT must publish the reference offer on the basis of which other operators will

not be obliged to pay additional costs which are not necessary for the provision of the service.

The reference offer must describe services offered by HT in relation to the service of

unbundled access to the local loop and sub-loop and collocation service and it must be broken

down into components according to market needs and associated conditions, including prices,

reasonable time limits and compensations in case of a delay, everything in accordance with

obligations specified in the decision referred to in Article 56, paragraph 2 of the ECA. The

reference offer must also contain a part where conditions of collocation services will also be

defined together with time limits, conditions and prices for the provision of the service

Furthermore, the Agency imposes on HT the obligation to, in relation to the obligation

imposed on HT as part of the obligation of access and concerning the provision of the service

of leasing of dark fibre, lay down conditions, time limits and prices of the service of leasing of



77

dark fibre in the reference offer for unbundled access to the local loop and related facilities

within 90 days from the receipt of a reasonable request. The Agency may, in a special

procedure, amend the prices and conditions for the provision of the service if it does not find

them reasonable and justified.

Furthermore, the Agency imposes on HT, in addition to the obligation imposed on HT under

the obligation of access to, and use of, specific network facilities, and in relation to the

provision of access on the basis of wavelength (WWDM access), the obligation to, specify

conditions, time limits and prices of the service of WWDM access in the reference offer for

unbundled access to the local loop and related facilities. The Agency may, in a special

procedure, amend the prices and conditions or the provision of the above-mentioned services

if it does not regard them as reasonable or justified.

The Agency also imposes on HT the obligation to publish, in addition to the reference offer

for unbundled access to the local loop and related facilities, the Static Plan for Frequency

Spectrum Management with the accompanying pair management plan in HT’s access

network, in accordance with the conditions to be laid down by an Agency’s decision. The

major technical problems which are increasing in importance when broadband technologies

are applied over copper access networks necessitate the frequency spectrum management plan

in copper cables in order to control interferences between the system and the realisation of

anticipated performance of the existing infrastructure for HT and operators. The Static Plan

for Frequency Spectrum Management must be based on the associated Study of the Static

Plan for Frequency Spectrum Management which is a result of research conducted by the

Faculty of Electrical Engineering and Computing in Zagreb. The Static Plan for Frequency

Spectrum Management is supposed to improve the usability of the existing copper cable

infrastructure to increase transfer speed necessary for broadband services. In case of technical

interferences caused by mutual influences of HT’s equipment and technologies and

beneficiary’s equipment and technologies, HT and the beneficiary shall invest their biggest

efforts to remove the causes of technical interferences. HT will regularly analyse the

application of the Static Plan and, where necessary, propose changes to the Agency. Both HT

and beneficiaries using HT’s access network to provide their services must ensure that

DSLAM equipment with its related user facilities operates in the adaptive (minimal) power

mode in order to rationalise the use of access network infrastructure in accordance with

conditions to be laid down in an Agency’s decision.

The reference offer must contain the conditions for the use of the service of unbundled access

to the local loop and types of transfer technologies that can be installed in the sub-loop and

under which conditions, and the related time-limits, penalties in case of delay and prices.

The Agency establishes that, pursuant to the obligation of non-discrimination, HT must be

imposed the obligation to prepare the reference offer in such a manner that will show that

operators have access to information over an information system. The Agency established that

this obligation does not represent an excessive burden on HT because HT already had such an

electronic database when market analysis was in progress. A computerised way of doing

business and communicating is nowadays a practice that increases the efficiency of

companies. The Agency thinks that this manner of work has positive impact on the efficiency

of HT’s business operations as well.

Also, as it was already mentioned in Chapter 7.1.1 of this document, HT must, for all works

on the realisation of collocation premises carried out by HT’s employees, publish in the



78

reference offer for unbundled access to the local loop and related facilities a price list of the

works in question to make the prices transparent to all operators when they pay the costs of

preparation of collocation premises and putting them at disposal.

Furthermore, HT must define in the reference offer the conditions for switching from the

bitstream access service to the service of unbundled access to the local loop and sub-loop in a

manner that does not endanger the continuity of beneficiary’s business operations.

The basic content of the reference offer, the degree of details and the manner of publication of

the reference offer are described in the Ordinance on reference offers69

, which was adopted by

the Agency’s Council and which entered into force on 1 April 2009..

The Agency shall set time limits for HT to publish the reference offer according to types of

services comprised by the relevant market70

.

a) Unbundled access to copper-based local loop

HT is obliged o publish the reference offer for unbundled access to the local loop and related

facilities on 1 October 2009. The offer must include terms and conditions, time limits and

prices of the service of unbundled access to copper-based local loop. Since HT already has a

reference offer for the service of unbundled access to the local loop based on obligations laid

down in the ECA, the Agency thinks that the deadline of 1 October 2009 is sufficient to

incorporate all amendments and to harmonise the text and content of the offer with regulatory

obligations which have been imposed on HT in this document, and with the Ordinance on

reference offers. HT’s reference offer will remain unaltered in all those parts in which

regulatory obligations have not changed. Should the Agency establish that the published

reference offer is contrary to the imposed obligations or contrary to provisions of the ECA, it

may request that the offer be amended.

b) Unbundled access to copper-based local sub-loop

HT must, within 90 days from the receipt of a reasonable request for the service of unbundled

access to copper-based local sub-loop specify conditions, time limits and prices of the service

of unbundled access to the local sub-loop in the reference offer for unbundled access to the

local loop and related facilities. Within the same time limit, HT must define the terms and

conditions for the collocation, together with time limits, conditions and prices for the

provision of the service in the manner which does not endanger the continuity of business

operations of beneficiaries. . Should the Agency establish that the conditions, time limits and

prices of unbundled access to the local loop are contrary to the imposed obligations or

contrary to the imposed obligations and provisions of the ECA, it may request that the offer

be amended.

c) Unbundled access to fibre-based local loop based on point-to-point link

HT must, within 90 days from the receipt of a reasonable request for the service of unbundled

access to fibre-based local loop based on point-to-point link specify conditions, time limits

69

OG 37/09 70

According to the definition referred to in Chapter 4.3 of this document.



79

and prices of the service of unbundled access to fibre-based local loop based on point-to-point

link in the reference offer for unbundled access to the local loop and related facilities.

Furthermore, in order to harmonise reference offers that must be published by all operators

having the status of an operator having significant market power on the relevant markets and

in order to ensure transparent conditions for business operations of operators having

significant market power and operators using the reference offer, that is, in order to prevent

HT from abusing its position of the SMP operator, and with the final goal to prevent the

distortion and hindering of competition in the electronic communications sector, HT must

incorporate the following in its reference offer that will be published on 1 October 2009:

• One of the security instruments that will be established by HT in the reference offer

for unbundled access to the local loop and related facilities must be a bill;

• HT is obliged to send during the current month invoices for the services which are the

subject of this reference offer and which have been provided in the pervious month;

• The maturity of the invoice is 30 days from the sending of the invoice, and HT shall

send a written dunning letter after the expiry of the maturity;

• HT shall apply the collection procedure on the basis of the submitted security

instruments only if the operator does not cover its mature and indisputable debts

within 30 days from the receipt of a written dunning letter;

• In case HT may not collect from the security instruments, HT may temporarily

discontinue the provision of the service only if the other operator does not pay any

overdue and indisputable invoice for services laid down in the reference offer within

30 days from the receipt of the written dunning letter. HT shall not be entitled to

temporarily discontinue the provision of the service if the operator delivers or renews

the adequate security instrument within 30 days from the receipt of a written dunning

letter.

The Agency shall once a year conduct the amendment procedure of the reference offer for the

purpose of implementation of regulatory obligations imposed pursuant to the provisions of the

ECA. For the purpose of satisfaction of regulatory principles and objectives referred to in

Article 5 of the ECA, the procedure for the amendment of the reference offer for unbundled

access to the local loop and related facilities may also in exceptional circumstances be

conducted several times a year. If the reference offer is amended on the basis of the above-

mentioned provisions of the ECA, the Agency shall impose on HT the obligation to publish

the new text of the reference offer within the time limit specified in the decision concluding

the process initiated in accordance with Article 58, paragraph 3 of the ECA.

If the SMP operator or some other operator wishes to initiate the procedure for the

amendment of the reference offer for unbundled access to the local loop and related facilities,

it must notify the Agency thereof and the Agency shall, provided that it considers the

operator’s request justified, initiate the procedure for the amendment of the reference offer

pursuant to Article 58, paragraph 3 of the ECA. If the reference offer is amended on the basis

of the above-mentioned provisions of the ECA, the Agency shall impose on HT the obligation

to publish the new text of the reference offer within the time limit specified in the decision

concluding the process initiated in accordance with Article 58, paragraph 3 of the ECA.

The Agency thinks that the publication of the reference offer removes barriers for market

entry defined in Chapters 6.4.2 and 6.4.3 of this document and encourages the entry of new

operators, this stimulating competition at the retail level. Therefore, the Agency finds this



80

obligation adequate and proportionate because, without regulation, HZ might, by means of

non-transparent terms and conditions, offer to other operators terms and conditions and prices

which are different from the ones provided for its own retail arm and its affiliated companies.

Therefore, the publication of the reference offer is a necessary obligation because it ensures

transparency of HT’s activities and, at the same time, supplements the obligation of non-

discrimination.

Furthermore, as part of the obligation of transparency, the Agency shall impose on HT the

obligation to monitor the relevant performance indicators starting from 1 January 2010, and to

deliver to the agency detailed reports with all performance indicators every three months71

or,

as appropriate, upon the Agency’s request. The Agency must be allowed access to the

system/database used for computing and storing of key performance indicators - KPI. Other

operators must also be allowed access to KPI data related to their activities, via HT’s WEB

interface. Furthermore, the Agency shall impose on HT the obligation to publish some or all

KPI values upon Agency’s request on its website in the adequate form. While doing this, it

must ensure that confidential data are not revealed to the public. Furthermore, HT must

deliver to the Agency the entire report every three months together with confidential data so

that the Agency may follow and, if necessary, prevent any kind of discriminatory behaviour

towards other operators. The KPI report must, in particular, contain the following:

• The number of received/denied/realised requests for unbundled access to an individual

local loop or sub-loop per operator

• The putting of the local loop at disposal – average (in days) per operator

• The number of delayed realisations of requests for unbundled access to a local loop or

sub-loop per operator

• The average delay in the realisations of requests for unbundled access to a local loop

or sub-loop per operator

• The number of received/denied/realised requests for the offer of collocation/extension

of collocation per operator and per type of collocation (physical internal, physical

external, distant or virtual)

• The establishment of collocations (physical internal, physical external, distant or

virtual) – average in days per operator

• The number of realised collocations (physical internal, physical external, distant or

virtual) outside a specific time limit (average) per

• The average time for the establishment of the service (collocation or unbundled

access to the local loop or sub-loop) per operator

• The number of notified malfunctions (interferences) per operator

• The average time for repair of the malfunction in the service of unbundled access to

the local loop or sub-loop per operator per service

• The average time of repair of defects of intermediary cables

• The average time of repair of defects of transfer cables

• The average time of repair of malfunctions in power supply

• The percentage of repaired malfunctions outside the set time limit per operator

The Agency may subsequently adopt a decision asking from HT to monitor and notify some

other KPI values depending on the Agency’s needs and market demands.

71

The first quarterly report must be submitted by HT in April of 2010.



81

Furthermore, within the obligation of transparency, and in order to supplement the obligation

of non-discrimination and remove the potential problems defined in Chapter 6.4.2.1 of this

document, HT must deliver/provide access to the following to all operators with which it has

concluded the contract for unbundled access to the local loop, upon their request:

• Information on network typology with locations of the main distribution frame, the

number of cable pairs connected to the main distribution frame and the number of

twisted pairs in the access network;

• Information on the availability, that is, on the number of active and the number of

available local loops and sub-loops on certain locations, that is, on all locations where

there is a possibility for collocation;

• Information on the existence of secondary equipment for multiple use of the local loop

and sub-loop in HT’s access network (information whether an individual local loop or

sub-loop has been realised with active equipment or not);

• Information on geographical coverage per individual HT’s main distribution frame or

other adequate equipment in the fixed telephone network in the form of a map or an

index of streets covered by an individual HT’s main distribution frame or other

adequate equipment in the fixed telephone network;

• Information on planned changes in the network and drafts for modernisation of the

network.

These obligations supplement the non-discrimination obligation and remove all potential

barriers defined in Chapters 6.4.2 and 6.4.3 of this document and similar barriers which have

not been explicitly defined.

.

7.1.4. Price control and cost accounting obligation72

The Agency may, pursuant to the obligations of Article 56 of the ECA, 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 might sustain prices at an excessively

high level, or apply a price squeeze, to the detriment of end-users.

The Agency shall ensure that any cost recovery mechanism or pricing methodology that is

mandated serves to promote efficiency and sustainable competition and maximise consumer

benefits. In this regard it may also take account of prices available in comparable competitive

markets.

Where an operator has an obligation regarding the cost orientation of its prices, the burden of

proof that charges are derived from costs including a reasonable rate of return on investment

shall lie with the operator concerned. For the purpose of calculating the cost of efficient

provision of services, the Agency may use cost accounting methods independent of those used

by the operator or the reference value method. It may require an operator to provide full

justification for its prices, and may, where appropriate, require prices to be adjusted.

The purpose of imposing the price control and cost accounting obligation is to ensure fair,

transparent criteria encouraging the development of competition. The operator should apply

72




82

these methods during break-down of costs of the services it provides. Cost accounting shall

refer to a group of rules and procedures ensuring the breakdown of costs, revenue, assets,

liabilities and capital in relation to certain activities and services, particularly taking into

account direct and indirect costs.

The cost-accounting system enables the implementation of the accounting separation

obligation and the verification of cost orientation of prices in order to prevent cross

subsidising, setting too high or too low prices, and inefficient behaviour of the designated

operator.

In order to prevent the occurrence of the competition problem defined in Chapter 6.4.3.2 of

this document where it was stated that HT may, without regulation, cross-subsidise its

services by charging other operators a price for the service of unbundled access to the local

loop that is above costs in order to be able to offer below-cost retail prices thus abusing its

position of significant market power, the Agency imposes on HT the following regulatory

obligations:

• The regulatory obligation of price control including the obligation of cost

orientation of prices, and

• The regulatory obligation to keep cost accounting in relation to the provision of the

service of unbundled access to the local loop.

The Agency thinks that the above-mentioned regulatory obligations would partially resolve all

competition problems laid down in Chapter 6.4.3.2 of this document. These problems could

additionally be resolved by obligations of non-discrimination and accounting separation

which have also been imposed on HT.

Since the Telecommunications Act laid down the obligation of cost orientation of prices and

keeping of cost accounting, the Agency has, in the document „Instructions for accounting

separation and cost accounting “73

defined the methodology of cost accounting to be used by

HT for the calculation of cost oriented prices of its services, among which the service of

unbundled access to the local loop. The Agency may also apply the method of cost accounting

regardless of the method applied by the operator. Therefore, the Agency has planned a project

for the definition of cost-accounting method (cost model) that will be used by the Agency

regardless of the method applied by HT for the purpose of control of cost orientation of HT’s

prices. Until the completion of this project, the Agency will not be able to verify the

alignment of HT’s prices with the regulatory obligations imposed in this Chapter.

Consequently, upon completion of the above-mentioned project, and on the basis of its

conclusions, the Agency shall define a method of cost accounting (cost model) to be used by

the Agency regardless of the method applied by HT. This method will be used to verify the

cost-orientation of prices of the service of unbundled access to the local loop.

The Agency thinks that, until that moment, price control should be based on the reference

values method on the basis of prices on comparable markets pursuant to Article 62, paragraph

2 and Article 62, paragraph 3 of the ECA.

73

which is a constituent part of the decisino of 18 November 2008 (Class: 130-01/06-01/09; Reg.No.: 376-11-

18)



83

However, considering competition problems identified in Chapters 6.4.3.1 and 6.4.3.2 of this

document and the Agency’s obligation to, in the transitional period until the implementation

of regulatory obligations defined in this Chapter, that is, until the definition of cost-oriented

prices of the service of unbundled access to the local loop, that is, of all services covered by

the definition of the relevant market given in Chapter 4.3 of this document, ensure fair

competition and prevent HT from abusing its position of significant market power, the

Agency has analysed the situation in the relevant market which is covered by this document

according to types of services making up the relevant market74

.

a) Fully unbundled access to copper-based local loop

Concerning the service of fully unbundled access to copper-based local loop it must be

mentioned that the monthly fee of this service currently amounts to HRK 52.14. The Agency

finds this price reasonable, that is, cost-effective for operators because it allows them to be

highly competitive on the related retail market, which is evidenced by a significantly strong

growth trend of the service of fully unbundled access to the local loop since it first became

available (See Figure 12.). The Agency also thinks that, provided that all other problems on

the market of wholesale network infrastructure access at a fixed location not related to price

are resolved, this price of the service in question is at a stimulating level for other operators

allowing them to continue investing into their won infrastructure, and that there is no need to

change this price until the implementation of a cost-oriented price.

Figure10. Number of fully unbundled accesses to the local loop

655

12.483

37.586

71.748

0

8.000

16.000

24.000

32.000

40.000

48.000

56.000

64.000

72.000

2006/2 2007/1 2007/2 2008/1

Source: Questionnaire for the market of wholesale network infrastructure access

It must be mentioned that the above-mentioned price, at the moment of the adoption of the

decision75

defining the price of the service of fully unbundled access to the local loop, was

calculated on the basis of the difference between retail prices of network access in EU 15 and

wholesale prices for fully unbundled access to the local loop in the same group of countries.

This relation was taken into account by the Agency in order to set below-retail access prices

for fully unbundled access to the local loop in the Republic of Croatia, that is, the Agency set

74

In accordance with the definition of the market given in Chapter 4.3 of this document. 75

Class: 344-01/05-01/145; Reg. No.: 376-05-02-10



84

the prices at this level to simulate fair competition at the relevant retail market. The growth

trend in the number of fully unbundled accesses to the local loop, illustrated in Figure 12,

clearly shows that the Agency’s intention was correct, that is, that it achieved the effect it

wanted to achieve.

As it was mentioned above, the Agency thinks that the current price of the service in question

is at a level that encourages operators to invest into their own infrastructure and that it is not

necessary to change this price until the implementation of the cost-oriented price. This

Agency’s position is based on the fact that the purpose for which the price of the service of

fully unbundled access to the local loop in the Republic of Croatia was set was fully justified

(illustrated in Figure 12). It is also a fact that only two European Union Member States have a

lower price of the service of fully unbundled access to the local loop than the Republic of

Croatia76

, which is evident from Figure 13. The Agency’s objective is not to lower the price

as much as possible in order to adversely influence, that is, discourage investments of

operators into their won access infrastructure.

Taking into account all of the above-mentioned reasons, the Agency thinks that, until relations

between retail and wholesale prices remain as they are, the price of the service of fully

unbundled access to the local loop should not be changed until the implementation of a cost-

oriented price in accordance with regulatory obligations imposed in this Chapter.

Figure11. Monthly fee for the service of fully unbundled access to the local loop– EU27 and RoC

5,8

9

6,1

4 7,5

2

7,5

8

7,7

5

7,7

9

7,8

3

8,1

2

8,2

6

8,3

4

8,3

7

8,7

0

8,9

5

8,9

9

9,2

9

9,2

9

9,3

3

9,3

6

9,3

9

9,4

8

9,6

5

9,9

5

10

,05

10

,40

10

,75

16

,43

10

,50

7,3

1

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

Poljska

Estonija

Hrvat

ska

Švedsk

a

Mađ

arska

Litva

Španjo

lska

Nizoz

emsk

a

Velika

Brit

anija

Latvij

a

Slove

nija

Rumunjs

ka

Grčka

Bugarska

Portugal

Belgija

Francu

ska

Austrija

Mal

taIta

lija

Slovač

kaCip

ar

Danska

Finsk

a

Češk

a

Njem

ačka

Luksem

burgIrs

ka

Source: Cullen International „Cross Country Analysis“ – Western Europe since January 2009. and

Central and Eastern Europe since December 2008

The Agency thinks that the prices of other services related to the service of fully unbundled

access to the local loop defined in the reference offer should remain unchanged. The Agency

also thinks that the proposed new prices or altered current prices of other services related to

the service of fully unbundled access to the local loop should be in compliance with

76

Poland and Estonia



85

regulatory obligations of transparency, non-discrimination and cost-orientation and based on

actual costs of provided services, including a reasonable rate of return on investments. HT, as

the operator providing the service of fully unbundled access to the local loop, shall be

responsible for proving the justification of prices of these services on the basis of the

mentioned costs.

This obligation was imposed on HT in order to prevent the possibility of leveraging of HT’s

significant market power from the relevant market covered by this document to the

downstream retail market by charging unjustified and unfounded costs of services.

b) Shared unbundled access to copper-based local loop

Concerning the service of shared access to the local loop, it must be mentioned that the

current price of HRK 22.37 was calculated on the basis of the average price of the service of

shared access to the local loop in all EU Member States. As opposed to fully unbundled

access, the calculation of the price of shared unbundled access to the local loop was not based

on the relationship with related retail prices.

Consequently, the Agency thinks that, until the completion of the cost models development

project, the control of prices of shared access to the local loop should be based on the

benchmark method and prices available on comparative competitive markets referred to in

Article 62, paragraph 2 and Article 62, paragraph 3 of the ECA.

In the process of calculating prices of services of shared access to the local loop, the Agency

used the method of benchmarks and prices available on comparative competitive markets,

taking into account the following documents, assumptions and methods

• Cullen International „Cross Country Analysis“ report for Western Europe since

January 2009, and Central and Eastern Europe since December 200877

;

• The amount of the monthly fee for the service of shared access to the local loop in all

Member States of the EU where this service is available78

;

• Removal of external values by means of adequate statistical methods;

• Exchange rate HRK/EUR – the average of the mean exchange rate of the CNB in a six

month period79

amounting to HRK 7.1748.

When analysing benchmarks, the Agency used data provided in the report by Cullen

International „Cross Country Analysis“for the amount of the monthly fee for the service of

shared access to the local loop in all European Union Member States (Table 4) or, more

77

The Agency used the last available data at the moment when this document was put to public consultation a on

2 March 2009, and not the latest data available when the decision on the SMP operation was adopted because the

latest data were not a part of public. 78 The Agency thinks that the relevance/justification of comparable data is the key to the quality implementation

of the benchmark method for the calculation of prices 79

Source http://www.hnb.hr/tecajn/htecajn.htm?tsfsg=c178a2621b885aeab6bd0c4ee5b2d912;

The average of the mean exchange rate was calculated on the basis of the last available official data at the

moment when this document was put to public consultation on 2 March 2009 (period between July and

December 2008)



86

precisely, for Western Europe countries since January 2009, and for Central and Eastern

European countries since December 2009.



87

Table 4. Monthly fee for the service of shared access to the local loop – EU27

Country EUR

Netherlands 0.19

Belgium 0.85

United Kingdom 1.55

Poland 1.56

Germany 1.78

Cyprus 1.83

Malta 1.86

Greece 2.04

Czech Republic 2.10

Hungary* 2.25

Portugal 2.51

Italy 2.57

France 2.90

Spain 3.00

Bulgaria 3.02

Luxembourg 3.20

Estonia 3.20

Slovenia 3.27

Sweden 3.75

Latvia 4.13

Romania 4.20

Austria 4.67

Slovakia 4.97

Denmark 4.98

Lithuania 5.46

Finland** 5.93

EU

27

Ireland 8.41

Source: Cullen International „Cross Country Analysis“ – Western Europe since January 2009. and

Central and Eastern Europe since December 2008

Note: * The amount of the monthly fee in Hungary was calculated on the basis of the average of all (5)

amounts of monthly fee for the service of shared access to the local loop..

** The amount of the monthly fee was calculated on the basis of the average of all (2) amounts of

monthly fee for the service of shared access to the local loop

Since in statistical analysis the most common measure of an “average” is the mean value

(arithmetic mean), the Agency decided to calculate this value in order to get the average price

of the service of shared access to the local loop in European Union Member States.

Furthermore, the Agency mentions that it is important to establish the existence of outliers.

Extremely low or extremely high values significantly influence the value of the arithmetic

mean which would result in a non-representative value. To establish these it is necessary to

determine the value of the first or the lower quartile and the third or the upper quartile80

, and

interquartiles81

. On the basis of the above-mentioned statistical indicators, the Agency

80

Quantiles are values of a numerical variable dividing ordered data into q equal parts. Quantiles dividing

statistically ordered data into 4 equal parts are called quartiles. Since in this case the order of quartiles is q=4

there are three quartiles, the first or the lower, the second or the median and the third or the upper. 81

Interquartile is the absolute measure of dispersion. This is a variation range of the middle 50%members of a

series of ordered data.



88

determined the lower and the upper extremes in order to determine outliers, that is, values that

could influence the calculation of the mean value (arithmetic mean) that would be poorly

representative of initial values.

Calculation formulae:

• The first quartile: Q1=N/4

• The third quartile: Q3=3N/4

• The interquartile: Iq=Q3-Q1

• The lower extreme: Q1-1,5Iq

• The upper extreme: Q3+1,5Iq

Taking into account the above-said, the Agency thinks that these should be removed when

calculating the arithmetic mean.

Figure 12. Box-plot graph

Median = 3

25%-75%

= (1,86, 4,2)

Non-Outlier Range

= (0,19, 5,93)

Outliers

Extremesdijeljeni izdvojeni pristup

-1

0

1

2

3

4

5

6

7

8

9

Irska

Source: An overview resulting from the Statistica software package

As a result, and in accordance with the conducted analysis of the amounts of the monthly fee

for the service of shared unbundled access to the local loop in the European Union Member

States, it was established that the outlier is the amount of the monthly fee for the service of



89

shared access to the local loop in Ireland, and that, in accordance with the above, it was not

taken into account when calculating the median value (arithmetic mean), that is, the average

price of shared access to the local loop in European Union Member States. This is illustrated

in Table 5.

Table 5 Monthly fee for the service of shared access to the local loop in EU27 with marked quartiles and

outliers

Country EUR

Netherlands 0.19

Belgium 0.85

United Kingdom 1.55

Poland 1.56

Germany 1.78

Cyprus 1.83

Malta* 1.86 Greece 2.04

Czech Republic 2.10

Hungary 2.25

Portugal 2.51

Italy 2.57

France 2.90

Spain 3.00

Bulgaria 3.02

Estonia 3.20

Luxembourg 3.20

Slovenia 3.27

Sweden 3.75

Latvia 4.13

Romania** 4.20 Austria 4.67

Slovakia 4.97

Denmark 4.98

Lithuania 5.46

Finland 5.93

EU

26

Ireland*** 8.41

Average price € 2.99

Average price HRK 21,46

Note *first quartile; **third quartile; ***outliers

The median value of all prices for the service of shared access to the local loop in the

remaining 26 European Union Member States amounts to HRK 21.46.

In accordance with all of the above, the Agency imposes on HT the obligation of price control

in the following manner and in compliance with the following rules:

1) HT must, on 1 October 2009, include in the reference offer for unbundled access to the

local loop and related facilities the monthly fee for the service of shared unbundled access

to the local loop amounting to HRK 21.46.



90

2) HT must incorporate the new monthly fee for the service of shared unbundled access to

the local loop in the reference offer for unbundled access to the local loop and related

facilities exactly one year after the incorporation of the price referred to under item 1. HT

must, 60 days before the application of the new price for shared unbundled access to the

local loop, carry out the procedure for the verification of the price of shared unbundled

access to the local loop on the basis of the above-mentioned method;

3) HT must, for every subsequent year, carry out the procedure referred to in item 2 until the

moment when prices will be calculated on the basis of the cost accounting method (cost

models) referred to in this Chapter.

Furthermore, taking into account sudden changes in exchange rates caused by the world

economic crisis, the Agency finds it justified to allow both to HT and to the Agency to modify

the price of the service of shared unbundled access to the local loop that will correspond to the

new average exchange rate for the Kuna against the Euro if the average exchange rate for the

Kuna against the Euro changes in the last six months according to the Croatian National Bank

by more than 10% of the exchange rate used by the Agency to calculate the price of the

service of shared unbundled access to the local loop for every year.

In accordance with the above, if the average exchange rate for the Kuna against increases for

at least 210%, HT may modify prices of the service of shared unbundled access to the local

loop thus adjusting them to the average exchange rate for the Kuna against the Euro82

. On the

other hand, in case of a 10% fall in the average exchange rate for Kuna against the Euro, the

Agency will be able to implement a new price for the service of shared unbundled access to

the local loop, which will correspond to the new exchange rate of the Kuna against the Euro.83

The prices of other services related to the service of shared unbundled access to the local loop

defined in the reference offer shall remain unchanged. In the process of proposing new prices

or modification of the existing prices of other services related to the service of shared

unbundled access to the local loop, these prices must be in accordance with the regulatory

obligations of transparency, non-discrimination and cost orientation whereby prices must be

based on actual costs of provided services, including a reasonable rate of return on

82 An example for the first year. If at a certain moment the average mean exchange rate of the Croatian National

Bank for the last six months amounted to the minimum of HRK 7.8923 for 1 euro, HT will be able to change the

price of the service of shared access to the local loop, which was calculated on the basis of the method described

in Chapter 7.1.4 of this document, into the amount in kunas based on the new exchange rate. More precisely, if

this happened in the period of one year after the entry into force of this analysis, the average price of the service

of shared access to the local loop would not be calculated on the basis of the exchange rate of HRK 7.1748 for 1

euro and amount to HRK 21.46, but would be calculated on the basis of the exchange rate of HRK 7.8923 for 1

euro and would amount to HRK 23.60.

83

An example for the first year. If at a certain moment the average mean exchange rate of the Croatian National

Bank decreased in the last six months by at least 10% (1€=HRK 6.4573), compared to the exchange rate applied

by the Agency in this analysis (1€=HRK 7.1748), the Agency will be able to change the price for the service of

unbundled access to the local loop calculated on the basis of the method described in Chapter 7.1.4 of this

document into the amount in kunas on the basis of the new exchange rate. More precisely, if this happened in the

period of one year after the entry into force of this analysis, the average price of the service of shared access to

the local loop would not be calculated on the basis of the exchange rate of HRK 7.1748 for 1 euro and amount to

HRK 21.46, but would be calculated on the basis of the exchange rate of HRK 6.4573 for 1 euro and would

amount to HRK 19.30.



91

investments. HT, as the provider of the service of shared unbundled access to the local loop,

shall be responsible to prove that the prices for these services are justified.

This obligation was imposed on HT in order to prevent the possibility for leveraging HT’s

significant market power from the relevant market which is the subject of this document to the

downstream retail market by charging unjustified and unfounded prices for services.

c) Unbundled access to copper-based local sub-loop

Concerning the service of shared unbundled access to the local sub-loop, in accordance with

the regulatory obligation of access imposed in this document, in case of a reasonable request

on the part of the operator before HT’s fulfilment of the obligation of cost orientation of

prices, the Agency imposes on HT the obligation of to control prices in the following manner:

• HT must, within 90 days from the receipt of a reasonable request, include in the

reference offer for shared unbundled access to the local loop and related facilities a

reasonable price for the service of unbundled access to the local sub-loop relating to a

monthly lease of the sub-loop;


reference offer for shared unbundled access to the local loop and related facilities

reasonable prices for all accompanying services related to unbundled access to the

local sub-loop;

• HT must define all of the above-mentioned prices at such levels that the operator with

the minimum efficiency of HT may offer services to end users without incurring losses

and by earning a reasonable profit;

• HT must deliver the prices of services and the price calculation method to the Agency

15 days before the publication of these prices in the reference offer together with t

detailed elaboration and justification.

If HT does not succeed in presenting its proposal as reasonable and if the Agency deems that

HT’s proposal will not prevent the abuse of significant market power by HT, the Agency may

modify the prices in a special administrative procedure pursuant to the ECA, in accordance

with this analysis and regulatory obligations imposed on HT.

d) Unbundled access to fibre-based local loop by means of point-to-point link

Concerning the service of unbundled access to fibre-based local loop by means of point-to-

point link, in accordance with the regulatory obligation of access imposed by this document,

in case of a reasonable request by an operator before the fulfilment of the obligation of cost-

orientation of prices, the Agency shall impose on HT the obligation of price control:


reference offer for shared unbundled access to the local loop and related facilities a

reasonable price for the service of unbundled access to the fibre-based local loop by

means of point-to-point link referring to a monthly lease for the service of unbundled

access to fibre-based local loop by means of point-to-point link



92

• The wholesale price for the service of unbundled access to the fibre-based local loop

must contain a reasonable rate of return on investment in addition to costs84

;


reference offer for shared unbundled access to the local loop and related facilities

reasonable prices for all accompanying services related to unbundled access to the

fibre-based local loop by means of point-to-point link;

• HT must define all of the above-mentioned prices at such levels that the operator with

the minimum efficiency of HT may offer services to end users without incurring losses

and by earning a reasonable profit;

• HT must deliver the prices of services and the price calculation method to the Agency

15 days before the publication of these prices in the reference offer together with t

detailed elaboration and justification.

If HT does not succeed in presenting its proposal as reasonable and if the Agency deems that

HT’s proposal will not prevent the abuse of significant market power by HT, the Agency may

modify the prices in a special administrative procedure pursuant to the ECA, in accordance

with this analysis and regulatory obligations imposed on HT.

e) Collocation services

Concerning the collocation services arising from the regulatory obligations of access, non-

discrimination and transparency, all prices related to HT’s collocation services must be

calculated in accordance with the regulatory obligations of transparency, non-discrimination

and cost orientation in which case prices must be based on actual costs of the provided

services, including a reasonable rate of return on investments. HT, as an operator providing

collocation services, shall be responsible to prove that prices have been based on the above-

mentioned costs.

This obligation was imposed on HT to prevent the possibility of leveraging of HT’s

significant market power from the relevant market dealt with in this document to the

downstream retail market by charging unjustified and unfounded costs of services.

The division of costs related to the preparation of collocation premises and putting them at

disposal shall remain identical to the definition in the Reference Offer for the service of


7.1.5. Obligation of accounting separation85


operators with significant market power the obligation of accounting separation in relation to

specified activities related to interconnection and/or access.

The Agency may, in particular, require a vertically integrated operator to make transparent its

wholesale prices and its internal transfer prices inter alia to ensure compliance where there is

a requirement for non-discrimination pursuant to Article 59 of the ECA, or, where necessary,

to prevent unfair cross-subsidising.

84 The Agency thinks that the reasonable rate of return does not have to be the same in all cases but it will

depend on whether it was necessary to built new ducts or fibres run through the existing ducts. 85

Article 11 of the Access Directive (eng. Access Directive)



93

The manner and procedure of accounting separation may be prescribed in more detail in a

decision of the Agency referred to in Article 56 of ECA.

To facilitate the verification of compliance with obligations of transparency and non-

discrimination, the Agency shall have the authority to demand access to accounting records,

including data on revenues earned in the market, and to publish such information if this would

contribute to an open and competitive market, while respecting rules on confidentiality

provided for in Article 15 of the ECA.

Structural separation and separate accounting of costs of electronic communications services

of operators with significant market power serves to fulfil the legal obligation aimed at

preventing subsidisation of one of electronic communications service on the relevant markets

on which operators have been designated as SMP operators. Accounting separation means

that operator’s activities are separated into separate affairs or services for accounting needs.

The system of separate accounts enables the implementation of the principle of non-

discrimination i.e. of equivalent market conditions which encourages the development of

competition and entry of new operators on the market.

According to provisions of Article 57 of the Telecommunications Act, the obligation of

accounting separation was imposed on HT by force of law when it was designated as the SMP

operator. Paragraph 5 of the above-mentioned Article also prescribes that the Agency’s

Council shall adopt a decision regulating the manner of dividing business activities of

operators with significant market power in terms of their organisation and calculation, and

other related details. In accordance with this, the Agency’s Council adopted a decision on 18

November 200886

mandating on HT how to implement accounting separation and cost

accounting in the manner and within time limits laid down in the document „Instructions for

accounting separation and cost accounting“.

Since it was established in the analysis conducted in this document that HT might, in the

absence of regulation, discriminate against other operators in terms of price as opposed to its

own retail arm or affiliated companies or cross-subsidise services at vertically related markets

thus abusing its position of significant market power, the Agency has decided that the

imposed regulatory obligation must be kept in order to prevent the above-mentioned market

problems, and HT was accordingly mandated the regulatory obligation of accounting

separation in the market of wholesale (physical) network infrastructure access (including

shared or fully unbundled access) at a fixed location.

The Agency thinks that the regulatory obligation of accounting separation will eliminate all

competition problems as defined in Chapter 6.4.3 of this document and all problems which

have not been explicitly defined but might cause same or similar consequences on the market.

The Agency also feels that this will directly resolve the problem of cross-subsidisation, in

combination with the already imposed obligations of non-discrimination and transparency. In

accordance with this, HT has been imposed the regulatory obligation of accounting separation

in order to ensure the implementation of obligations of non-discrimination and transparency

that had already been imposed on HT.

86

Class: 130-01/06-01/09, Reg. No.: 376-11-18



94

The Agency’s Council has, at it was already mentioned, imposed on HT the obligation of

accounting separation which, among other things, refers to the service of unbundled access to

the local loop, which was defined in the document “Instructions for accounting separation and

cost accounting” under „Segment 3 – Wholesale network infrastructure access (including full

and shared access) at a fixed location“. This document defines the manner of implementation

of accounting separation and cost accounting, and the manner and time limits for their actual

implementation to be applied by HT in practice in order to implement the regulatory

obligation of accounting separation pursuant to the provisions of the Telecommunications

Act.

In this Chapter, the Agency, pursuant of he provisions of the ECA, imposes on HT the

regulatory obligation of accounting separation which is identical to the obligation of

accounting separation the manner of implementation of which was defined in the above-

mentioned Agency Council’s decision on 18 November 2008 Taking this into account, HT

must implement the provisions of this decision referring to the market of wholesale (physical)

network infrastructure access (including shared or fully unbundled access) at a fixed location,

which was defined in the document “Instructions for accounting separation and cost

accounting” under „Segment 3 – Wholesale network infrastructure access (including full and

shared access) at a fixed location“.

By means of this regulatory obligation HT is mandated, as a verification of the

implementation of obligations of transparency and non-discrimination in relation to the prices

of services defined in the market of wholesale (physical) network infrastructure access

(including shared or fully unbundled access) at a fixed location, to keep and show accounting

data for the market of wholesale (physical) network infrastructure access (including shared or

fully unbundled access) at a fixed location separately from accounting data for other HT’s

activities in order to achieve the transparency of all wholesale prices charged by HT to other

operators for the provided services, and of internal transfer prices charged for the services

provided to its retail arm and affiliated companies. .

When implementing the regulatory obligation of accounting separation, HT must take

particular account of European Commission recommendations and guidelines on accounting

separation.

As it was already mentioned, the Agency imposed on HT the obligation of accounting

separation in order be able to control compliance with the regulatory obligations of

transparency and non-discrimination and in order to prevent cross-subsidising between

services offered by HT. HT is a vertically integrated operator because of which it is important

to have control over internal transfer prices offered to its retail arm in order to prevent cross-

subsidising aimed at leveraging significant market power from the market of wholesale


fixed location to the downstream retail market. Since both the wholesale and the retail service

are offered by the same, vertically integrated, operator, accounting separation is the only way

of control to make sure that the operator is not cross-subsidising and thus vertically leveraging

significant market power..

Obligations imposed by the Agency on the SMP operator must be proportionate with the

benefits resulting from the compliance with this obligation. If the imposition of this regulatory

obligation causes additional costs for HT, the Agency thinks that the benefit from the



95

obligation, which is measured by the prevention of violation of regulatory obligations of

transparency and non-discrimination and the prevention of cross-subsidising (because they

could not do it themselves) significantly exceeds costs incurred by this obligation. This

regulatory obligation only serves to verify HT’s compliance with other regulatory obligations

imposed in this document.

7.1.6. Other regulatory obligations that might be imposed by the Agency on the market

of wholesale (physical) network infrastructure access (including shared or fully

unbundled access) at a fixed location, pursuant to ECA

The Agency has also mentioned in Chapter 6.4.2.4 of this document a problem referring to

undue use of information about competitors. This problem does not require the imposition of

a regulatory obligation on SMP operators because this kind of behaviour is prohibited

regardless of the SMP operator status.

In other words, no operator, regardless of the fact whether it has the status of an SMP

operator, may unduly use information about a competitor. This is prescribed in Article 66,

paragraph 5 of the ECA, which explicitly prescribes that Operators which acquired

information from another operator before, during or after the process of negotiating access or

interconnection may use that information solely for the purpose for which it was supplied87

.

For the purpose of effective implementation of regulatory obligations referred to in Chapter 7

of this document, the Agency shall, where necessary, provide the necessary implementation

instructions to SMP operators and they are obliged to comply with these instructions.

87




96

8. Annexes

8.1 . Annex A – Opinion of the Croatian Competition Agency

REPUBLIC OF CROATIA

CROATIAN COMPETITION AGENCY

Class: 031-01/2009-01/17

Reg. No. 580-05-09-45-2

Zagreb, 26 March 2009

CROATIAN POST AND ELECTRONIC

COMMUNICATIONS AGENCY

Att: Gašper Gaćina, Chairman of the Agency’s Council

Jurićićeva 13

10 000 Zagreb

Re: Croatian Post and Electronic Communications Agency

- request for opinion on relavant markets

- expert opinion, delivered

The Croatian Competition Agency (hereinafter. the Agency) received on 10 March 2009 a

request from the Croatian Post and Electronic Communications Agency (hereinafter.

HAKOM) asking for the Agency’s opinion on conclusions concerning the identification of

relevant markets pursuant of the Electronic Communications Act (Official Gazette, No. 73/08,

hereinafter: the Act) and proposals of decisions adopted in accordance with these conclusions.

The Agency has examined the proposals for Decisions, and on the basis of the decision of the

Competition Council (hereinafter: the Council), within the meaning of Article 29, paragraph

1, Article 34 and Article 35, paragraph 1, item 6 of the Competition Act, at is session held on

26 March 2009, adopted the following:

O P I N I O N

The proposals for Decisions delivered to the Agency by the Croatian Post and Electronic

Communications Agency are not contrary to the provisions of the Competition Act.

Statement of reasons:

In the public consultation procedure, HAKOM delivered to the Agency the analysis of the

following markets: the market of call origination on the public telephone network provided at

a fixed location., the market of call termination on individual public telephone networks

provided at a fixed location, the market of wholesale (physical) network infrastructure access

(including shared or fully unbundled access) at a fixed location, the wholesale broadband

access market, the market of call termination on individual mobile public communications

network, the market of call transit in a fixed public communications network, the market of

access and call origination from mobile public communications networks, the market of SMS



97

termination on individual mobile public communications network, and the market of publicly

available telephone services in mobile electronic communications networks, as well as

proposals of Decisions based on the above-mentioned analyses.

After having examined the proposals for Decisions, the Agency established that these were

technical documents adopted by HAKOM within its regulatory competence and that they

were not contrary to the provisions of the Competition Act.

However, in actual procedures related to undertakings active in the market of

telecommunications services, the Agency, in each individual case, identifies the relevant

market, which does not have to necessarily coincide with the relevant markets established ex

ante by HAKOM.

Chairman of the Competition Council

Olgica Spevec

(signed)



98

8.2 Annex B – Comments on the market of wholesale (physical) network

infrastructure access (including shared or fully unbundled access) at a

fixed location and the Agency’s reply to the delivered comments

8.2.1 Answers to comments made by HT-Hrvatske telekomunikacije d.d.

Answers to HT’s comments follow the Chapter numbers in the document commented on by

HT and the titles of HT’s comments.

4. Definition of a relevant market

4.1.1. Retail market of wholesale broadband Internet access

4.1.2. Demand-side substitution – retail level

The Agency has, in accordance with the definition of the Communication Committee, and for

the purposes of analysis, regarded the access speed over144 kbit/s as broadband access speed

and, on the basis of this and data collected by means of questionnaires, it has defined the ways

in which broadband Internet access service is made available to the end user. HT thinks that

the division of services to those below and above the speed of 144 kbit/s is not satisfactory,

that is, that it is not sufficient to divide electronic communications services to those with

access speed below and above 144 kbit/s. HT states that services with speed above144 kbit/s

include a large group of applications and contents which are very demanding towards

broadband services and, therefore, HT thinks that broadband services could be divided into

several categories, including, for example, services for corporate users, customer support

services, services of multimedia corporate and personal applications, services of multimedia

games, services of other multimedia fun. Each of these categories of services requires a

different range of speed (and quality). Consequently, HT thinks that a comparison of

individual services must be clearly differentiated from the comparison of individual

technologies because of which the analysis of substitutability of individual services must be

separated from the analysis of substitutability of individual technologies, regardless of the

point of view of the analysis. It also claims that the analysis of substitutability of services in

the entire spectrum ranging from 144 kbit/s to 25 Mbit/s might lead to incorrect conclusions.

The Agency disagrees with HT’s proposal that broadband services should be divided into

several categories as proposed by HT since the subject of this analysis is the wholesale

broadband access and not the analysis of individual speeds corresponding to individual groups

of services. As the Agency has already specified in the document, since the demand for the

service of wholesale network infrastructure access at a fixed location results from the demand

for retail broadband access, the Agency thought it would be appropriate to, when establishing

the dimension of services of the relevant market of wholesale (physical) network

infrastructure access (including share or fully unbundled access) at a fixed location, to

determine substitute services on the wholesale market while taking into account the ways in

which operators at the retail market provide the service of broadband Internet access to the

end user.

In other words, the Agency did not divide services into those below and above 144 kbit/s, but

the goal was to establish which ways of broadband Internet access at the retail level used for

the provision of various broadband services may regarded as substitutable because the

demand for these ways of broadband Internet access leads to demand at wholesale level. For

that purpose the Agency had to define a limit above which access speed will be regarded as



99

broadband access speed. In this manner the Agency used demand at the retail level to

establish which types of access are regarded by operators as substitutable at wholesale level.

.

The Agency disagrees with HT’s claims that, in the part referring to demand-side substitution-

retail level, the Agency did not apply clear and consistent criteria to establish whether an

individual service is a substitute for the observed service. Substitute services, as it was stated

in the document, are those services to which consumers could easily switch in case of a

hypothetical price increase, and thus satisfy their equivalent need. Therefore, the most

important criteria that the Agency used to establish the substitutability of services were –

price and functionality. In addition to the mentioned criteria, the Agency took into account

other criteria as well, such as service penetration, which only confirms whether services are

substitutable in terms of their price and functionality.

HT states that it is not clearly specified in the Agency’s analysis to which period the analysis

refers to, and that it may be concluded from the examples given by the Agency that the

Agency as a rule takes the current situation to be the period covered by the analysis without

predicting the development of the entire situation in the future. HT thinks that the

development of the current situation in the future should be the basis of ex ante analysis of the

relevant market (i.e. it should be forward looking). HT’s example is that the Agency takes the

speed of 2 Mbit/s as basic access speed, and this is the speed that HT does not even have in its

offer of ADSL access88

and for that reason the mentioned speed cannot represent the Internet

access speed over twisted-pair copper wire with the greatest penetration.

HT’s claim concerning that period covered by the analysis was imprecisely defined is

unfounded because Article 52, paragraph 2 of the ECA reads that the Agency shall carry out

procedures referred to in Article 52, paragraph 1 of the ECA, which include the identification

of relevant markets, the carrying out of market analysis and the imposition of regulatory

obligations on a regular basis, and at least every three years. As a result, the longest period

that the analysis may cover is three years. For that reason the Agency observed the situation in

the relevant market and adopted conclusions while bearing in mind that the next procedure of

the analysis of the relevant market would be carried out in three years time.

However, it must be emphasised that the Agency may at any time again initiate the market

analysis procedure in case of significant changes on the relevant market. In accordance with

Article 52, paragraph 3 of the ECA, operators may request from the Agency to carry out the

market analysis procedures if they make probable the existence of changes which exert a

significant influence on regulatory obligations on the relevant market. Operators may also ask

from the Agency to carry out the market analysis procedure if they make probable the

existence of changes on the basis of which certain operators should have the status of

operators with significant market power.

Furthermore, HT’s claim that future development of the current situation should be the basis

for an ex ante analysis of the relevant market is correct. However, HT makes the wrong

conclusion that the Agency does not analyse the future development of the current situation

since the Agency did take into account the forward looking principle, which is particularly

88

HT has in a relatively short time after the publication of the analysis of the relevant markets and before the

conclusion of public consultation incresed the speed of ADSL access.



100

obvious from the fact that the Agency included into the scope of services of the relevant

market services which are based on advanced technical solutions (FttCab and FttH solution).

So, for example, services based on FttH solution, although in the initial stages of the pilot

project, according to HT’s forecasts, should in the time period covered by the analysis, that is,

in three years time at the longest, become very important. For that reason the Agency has,

taking into account the future development of the market, and in order to be able to promptly

react to changes having a significant influence on regulatory obligations on the relevant

market, included services based on advance technical solutions into the dimension of the

relevant market.

Furthermore, in reply to HT’s false claims that the Agency takes the speed up to 2 Mbit/s as

the most frequent access speed, the Agency points out that in section 4.1.2.1.1 of this

document it stated only in the overview of periods covered by questionnaires that the most

frequent basic speed in the entire period, up to the start of public consultation, amounted up to

2 Mbit/s. Therefore, the Agency did not state that the most frequent speed was the one up to 2

Mbit/s, but that the most frequent speed in the entire period covered by questionnaires was the

basic speed. Only for the purpose of an overview of the current situation, the Agency stated

that at that time the basic access speed amounted up to 2 Mbit/s, although in this entire period

the basic speed changed, which is the case now as well when it amounts up to 4 Mbit/s. As a

result, the Agency deems that this HT’s comment was unnecessary, particularly because the

speed of 2 Mbit/s had no relevance in the Agency’s further analysis.

HT thinks that the Agency did not apply the hypothetic monopolist test appropriately in its

analysis, that is, that the Agency only mentions that the above-mentioned test shows when a

certain services is not a substitute service for the observed service. HT thinks hat the Agency

should describe the mentioned test in detail, and show and substantiate by evidence the impact

of the test on the behaviour of end users. HT thinks that the application of the hypothetic

monopolist test in the manner the Agency applies it in the published analysis of the relevant

market does not serve a purpose and that it is flawed since it does not contain the exact data

that would support such a hypothesis made by the Agency.

The hypothetic monopolist test or the SSNIP test is a formal economic test and as such it

substitutes ad hoc definition of the relevant market. The basis of the SSNIP test is a

hypothesis or an assumption, which is why the essence of the hypothetic monopolist test is to

predict, and not to prove. SSSNIP test implies the consideration of a service and a

prediction/assumption/presumption of the influence of a small, but significant, price increase

(5-10%) on sale, and, consequently, on earnings of the hypothetical monopolist, in the

absence of regulation. SSNIP test may be (therefore, it is not necessary or obligatory)

conducted by means of an empirical assessment. The starting point of the empirical

assessment is data collected by market research (survey among users and of the market):

Since market research requires the employment of specialised external agencies, it requires, in

addition to time, certain funds. Since concrete data necessary for the empirical conduct of this

test are very rarely available to national regulatory authorities, and because the existing

regulation is very often sufficiently precise to prevent, that is, avoid the forecast price

increase, we would like to point out that neither the European practice is focused on collection

or presentation of concrete results of the SSNIP test.



101

Therefore, according to the IRG’s standpoint89

, SSNIP test is a hypothetical experiment used

by national regulatory authorities very often without adequate information or data (e.g. price

elasticity). In this respect, IRG recognises the usefulness of available/existing data (e.g.

previous price modifications) but insists that the availability of such or similar data may not

be regarded as a conditio sine qua non both for the conduct of the SSNIP test and for market

identification. The SSNIP test should, in the first place, contribute to the finding of the cause-

and-effect links and the adoption of logical conclusions in certain situations in which the

existing data may be used but the existence of such data is not obligatory for a successful

SSNIP test.

In accordance with the above, the Agency has, on the basis of the SSNIP test, given only

those conclusions which are more than obvious because they arise from clear and unequivocal

situations to which the test in question refers in the first place.

4.1.2.1.2. VDSL access over twisted-pair copper wire

HT underlines that in the part on the substitutability between VDSL access over twisted-pair

copper wire and ADSL access over copper wire the Agency did not take into account the

specific HT’s network architecture because of which the provision of VDSL access over

twister-pair copper wire, be it for its own retail arm or for the needs of alternative operators, is

not possible on such HT network infrastructure. HT also states and this is a quote: “The

Agency does not take into account modern trends in the development of ADSL technology and

management of access network and completely ignores its own efforts to increase the

efficiency of ADSL technology evident in the procedure for the preparation of the StaticPlan

and the adaptive power mode“.

The Agency does not agree with HT’s claims and underlines that there are no significant and

important differences between HT’s access network and access networks of the majority of

European countries. These networks have identical structures both on the physical and logical

levels. HT’s access network, as well as access networks of other operators in other countries,

is tree- structured on the physical layer, and a star- structured on the logical layer, meaning

that there is no difference between these networks. HT’s claim would be correct only if the

structure of HT’s network at the physical level would be star-structured, and not tree-

structured. Such an access network model would not allow the sub-loop unbundling, and the

provision of services on the basis of VDSL technology. However, since HT’s network is tree-

structured at the physical level, as well as access networks of other European operators, the

sub-loop unbundling is technically feasible as well as the provision of high-quality broadband

services based on VDSL transfer technology. Therefore, it must be emphasised that the figure

of the schematic presentation of HT’s access network provided on p. 68 of HT’s comments is

not accurate. In other words, that figure shows an access network which is star-structured on,

and not three-structured on a physical layer, which is the case with HT’s access network

structure.

Furthermore, the Agency recognises the fact that HT’s access network, as opposed to the

majority of access networks of Member States of the European Union, is a “rigid type”,

meaning that it does not have installed cable routers – places where elastic switching of local

loops from the secondary to the primary network segment takes place. However, every

«rigid» access network, provided that justified reasons exist and they are, in this case, further

89

Independent Regulators Group



102

liberalisation of electronic communications market in the Republic of Croatia, and may turn

into an «elastic» one without major infrastructural interventions. However, the reverse does

not work. An «elastic type» access network may not be transformed into a “rigid type” access

network without major infrastructural interventions (this in principle requires an increase of

capacity in the primary segment of the network).

Therefore, if the operator on the basis of analysis of requests for new services which may not

be provided from the location of the local exchange due to excessive length of the local loop

decides that there are commercial reasons for the provision of these services by installing a

VDSL transfer technology at a certain point of the access network (the sub-loop unbundling

concept) while completely preserving network integrity, there are no technical obstacles to the

realisation of this idea. In case of a «rigid network» it requires only an installation of a new

cabinet at the point in question, which at the same time serves for the termination of the

segment of the primary and of the secondary network and for accommodation of active

equipment. Since this cabinet is installed only to provide high-quality broadband services, it

may be equipped with passive equipment (entrance cables, modules, cross-connect wire, etc.)

fully adjusted to VDSL transfer technology. Countries which have networks of the «elastic

type» use the existing splitters the passive equipment of which is not adjusted for the work of

the mentioned transfer equipment and therefore causes many problems in use, that is, it needs

to be reconstructed.

Therefore, it is obvious that the concept of the «rigid network» is no obstacle for the

introduction of VDSL transfer technology because this kind of network may relatively easily,

by installing a cabinet (a relatively small investment compared to the FttH concept of access

network in the distribution part, without the system of cable ducts), be transformed into an

“elastic type” network. The Agency’s opinion is therefore that when VDSL2 transfer

technology is introduced into the subscriber loop far more attention should be paid to the

problem of preservation of network integrity, while the type of the access network («rigid» or

«elastic») has no bearing.

Consequently, the Agency feels that the introduction of VDSL2 technologies into the access

network is important for several reasons. Innovations in the area of ADSL2plus transfer

technology (spectrum management, different operational modes; L0, L2 i L3, limitations of

the maximum margin value, adding virtual noise, quick speed adaptation), which have already

appeared or will appear in the years to come, will not be adequate to challenges required by

new multimedia services. This in the first place refers to transfer speed, quality of services,

stability, reliability, and resistance of DSL line to the influence of various types of impulse

interferences. Standardisation on dynamic spectrum management (DSM) level 3 for

ADSL2plus technology is not a common practice in the world because it is not economically

justified for this type of transfer technology.

The standardisation of DSM level 4 for VDSL2 technology is in progress and chipset that will

be able to support it expected to appear next year. All well-known producers of DSLAM

equipment are planning to deliver in 2011 VDSL2 transfer equipment which supports DSM

level 3. DSM level 1 is already available at some producers of ADSL2plus transfer equipment

while DSM level 2 will most probably not allow distributed implementation as was the case

with DSM level 1 but only centralised one, which creates additional problems in the

unbundled environment such as the one in the Republic of Croatia. All these facts support the

Agency’s attitude that, in the years to come, ADSL2plus technology will become unable to



103

accommodate all users’ requests and that VDSL2 technology needs to be gradually introduced

into the access network.

The introduction of VDSL2 transfer technology into the access network is important also

because of transparent and non-discriminatory behaviour towards beneficiaries in the

evolutionary concept of broadband access networks development based on the symmetric

pair. This concept is today applied exclusively in European Union countries because it does

not endanger the sustainability of beneficiaries. Where VDSL2 transfer technology is not

introduced, the evolution scenario of access network is then based on ADSL2plus technology

meaning that the concept of the opening of new access nodes must be applied instead of the

concept of sub-loop unbundling. This concept in the unbundled environment forces

beneficiaries which have collocations on the existing location of the local exchange to arrange

for collocation premises on a new location and install the necessary equipment at the new

location as well or cede their users to the SMP operator. („take-it-or-leave-it principle“).

On the contrary, in the evolution scenario of sub-loop unbundling the beneficiary may still

supply its users without collocating its equipment at a distant location. Clearly, in this case the

beneficiary may not offer transfer speed equivalent to that provided by the operator with

significant market power from a distant location. In this context beneficiaries still have at their

disposal a complete area of the access network which they had at the moment of adopting a

business decision to realise their collocation at this location but transfer speed they may

provide compared to the operator which collocated equipment at a distant location is several

times slower.

Sub-loop unbundling with ADSL2 transfer technology is not economically justified because,

except for the condition concerning the preservation of network integrity (a condition that

must be fulfilled), there is no significant increase in transfer speed compared to transfer speed

achieved from location of the local exchange and certain investments are required.

.

The Agency, therefore, thinks that further evolution scenario of broadband access networks

based on symmetrical pair must be based on the sub-loop unbundling concept with VDSL2

transfer technology. Only in those access networks which are not unbundled, that is, in those

where the beneficiary did not collocate his equipment in the SMP operator’s local exchange,

should there be the possibility of evolution scenario based on the concept of opening a new

access node with ADSL2plus and/or VDSL2 transfer technologies depending on HT’s wishes

Furthermore, HT pointed out that the Agency stated that VDSL access over twisted-pair

copper wire and ADLS access over twisted-pair copper wire are substitutable services

because this will satisfy the need of users for more quality, faster and innovative services and

it stated that the Agency proved this idea exclusively from a technical perspective without

taking into account the price that the end users will have to pay for the above-mentioned

service. HT also pointed out that the Agency again only mentioned that the hypothetic

monopolist test proved the substitutability of the service without elaborating on it or

supporting its analysis by exact data resulting from the test and therefore, it once again

indicated that the Agency has an inconsistent approach because it did not take into account the

prices of these services as opposed to the analysis of substitutability of other services in this

analysis.



104

Consequently, the Agency thinks that the price for services based on VDSL access over

twisted-pair copper wire, in order to create a sufficient level of demand, will not be able to be

much higher than that of services based on ADSL access over twisted-pair copper wire and

users, due to the need for more quality, faster and innovative services, will be ready to pay a

higher price for services based on VDSL access over twisted-pair copper wire. Therefore,

although the Agency cannot know what will be the retail price for the mentioned services, it

feels that the combination of the price and of what is offered for this higher price will result in

VDSL access over twisted-pair copper wire becoming an adequate substitute service for

ADSL access over twisted-pair copper wire. It is the Agency’s opinion that this case does not

represent a switch to a new technology the cost of which is so high for the user that, in spite of

more quality services, the price will represent an insuperable factor that will dissuade the user

from using this service.

The above-mentioned Agency’s position results from the statements on page 19 of this

document where it reads that:„ VDSL access over twisted-pair copper wire represents an

adequate substitute service for ADSL access over twisted-pair copper wire, that is, that the

users are likely, in case of a hypothetical increase in the price of the service based on ADSL

technology, to substitute this service with the service based on VDSL technology. In other

words, services based on VDSL technology will be substitutable with the already existing

services based on ADSL technology because this would satisfy the need of users for more

quality, faster and innovative services. “

Concerning the elaboration related to HT’s comment that the Agency does not support the

hypothetic monopolist test with exact data, the Agency would like to point to the explanation

given on page 93 of this document in the part of the answer to comments related to the

hypothetic monopolist test.

Furthermore, HT points out that the decision on the reconstruction of the access network is a

matter of business policy of the infrastructure operator, and therefore it may not be imposed

by a decision of a regulatory authority, that is, that HT may not be forced to reconstruct its

network based on an Agency’s decision and/or request of other operators. HT states that the

ECA prescribes that operators of public communications have the right of the infrastructure

operator including building, maintenance, development and use of the electronic

communications network, electronic communications infrastructure and the associated

facilities and that it therefore may be concluded that interventions into the access network

may not be a result of an imposed obligation but they exclusively represent a right, that is, a

voluntary, business-related decision of the infrastructure operator.

However, the Agency thinks that HT as the infrastructure operator with significant market

power must develop, upgrade, and thus reconstruct the access network if demanded by the

operator using it provided that this is economically acceptable from HT’s point of view. If HT

were not a vertically integrated operator than this obligation would not be necessary because

this would be in the infrastructure operator’s interest since in this manner it would gain an

additional source of income from the existing network. However, in this case, this is not in the

interest of HT as the provider of retail services or a vertically integrated operator because the

opening of new distant locations for the needs of operators using its services directly

endangers its own position in the market. For that reason HT insists that the decision on the

reconstruction of the access network is a matter of HT’s business policy and may not be

imposed by a decision of a regulatory authority.



105

Concerning HT’s comment that its network is already shorter than the usual networks in other

EU countries and that, as such, it is barely long enough to be suitable for switching to VDSL

technology without prior reconstruction (60%of users is within 1000 m) and that, in this case,

the impact of reconstruction would be felt by only 40% of potential users, the Agency stresses

that HT is not consistent because it first states that HT’s specific network architecture is not

suitable for providing VDSL access over twisted-pair copper wire both for its own retail arm

and for the needs of other operators, and then, as the final comment, it states that HT’s

network is already suitable for switching to VDSL technology without prior reconstruction

(60% of users). HT is also inconsistent when it says that the impact of reconstruction would

be felt only by 40% of potential users because it also claims that the reconstruction of the

access network is problematic from the technical aspect considering HT’s network

architecture. All of the above supports the Agency’s conclusion that VDSL access over

twisted-pair copper wire represents an adequate substitute service for ADSL access over

twisted-pair copper wire.

4.1.2.2. Access over mobile networks

HT disagrees with the Agency’s conclusion that Internet access over mobile networks does

not represent a substitute service for ADSL access over twisted-pair copper wire, and it

supports its view by means of criteria given by the Agency when adopting a conclusion that

there is no substitutability between these services.

Concerning (non) coverage as the criterion, HT points out that the Agency neglected the fact

that that ADSL access service is also not available in all parts of the Republic of Croatia due

to the special terrain configuration and the accessibility of the existing network capacity, and

that such areas use precisely access over mobile GSM access (FGSM) to access the basic

service.

The Agency based its conclusions that access over mobile networks does not represent a

substitute service for ADSL access over twisted-pair copper wire on several criteria such as:

access speed, population coverage, price of tariff packages, existence of unlimited packages

and data on distribution of users – private or corporate. Although the Agency adopted this

conclusion on the basis of all of the above-mentioned criteria, the most important criteria used

to establish the substitutability of services are price and functionality. Therefore the Agency

disagrees with HT’s claims that the criterion of (non-) coverage was the main criterion for

substitutability of these services.

In relation to the above-mentioned criterion of coverage and HT’s example of non-availability

of ADSL access service in all parts of the Republic of Croatia (access over FGSM), the

Agency points out that the number of users accessing the basic service over FGSM access is

negligible in relation to the total number of users. It may, therefore, be concluded that the

population coverage of users of ADSL service is significantly higher than the population

coverage by HSDPA signal.

Furthermore, HT disagrees with the Agency’s conclusion that, considering retail prices,

services of mobile Internet access and ADSL access over twisted-pair copper wire are not

substitutable and thinks that the Agency completely ignored the dynamic development of

mobile access market in its analysis and that it based its conclusion on prices valid at the

moment when the analysis was conducted. HT states that the Agency ignored the



106

possibility/tendency of price drop on the relevant market of broadband Internet access over

mobile networks and it failed to show in its analysis what would be the impact of this factor

on the market of mobile Internet access.

HT also feels that the Agency’s claim, among other things, that mobile Internet access is not a

substitutable service for ADSL access over twisted-pair copper wire because „as opposed to

tariff packages offered for ADSL access over twisted-pair copper wire, users of broadband

Internet access over mobile networks do not have the possibility to choose unlimited

packages“, is only partially correct. This claim reflects the situation on the relevant market

only at the moment when this analysis was conducted, and the Agency did not take into

account the fact that this was a dynamic market which is very flexible in relation to the end

users’ demand. In this respect, HT says that the Agency claims in its analysis that there was a

growth trend noticed in relation to the share of users of unlimited packages, while the number

of users using basic packages including 1GB is on the decline.

In relation to this, the Agency states that it adopted certain conclusions on the basis of current

data/prices, which is the usual practice in case of market analysis. The Agency agrees with

HT’s claim that a dynamic development of the mobile access market needs to be taken into

account, as well as possible tendencies of a more significant price fall. However, the Agency

thinks that there are significant differences in prices and that in the time period covered by

this analysis there will be no significant price fall, particularly if one takes into account the

price of additional traffic (an additional GB of traffic in tariff packages offered on the basis of

mobile Internet access is between HRK 204.80 and 286.72, while in tariff packages based on

ADSL access over twisted-pair copper wire it amounts to HRK 20.00), which is why, among

other things, the Agency concluded that these two services are not substitute services.

However, the Agency will, as it already stated in this document, follow the future

development of the above-mentioned services, including its prices, and, where necessary, it

shall included the changes in the relevant market dimension.

In relation to the Agency’s claims that the majority of users of Internet access over mobile

networks are corporate users which is why the Agency concluded that this service is not a

substitute service for ADSL access over twisted-pair copper wire, HT feels that, quote: „the

service of broadband access over mobile networks does not include such specific elements

that would require the end users of this service to be the distinguishing factor“. This service is

available under equivalent conditions to both corporate and private users and its functionality

satisfies all needs of business and private end users in terms of mobile Internet access.

In conclusion, the Agency claims that the fact that the service of mobile Internet access is

primarily used by corporate users for whom mobility is very important was mentioned in the

first place as an additional criterion for substitutability, that is, in order to substantiate the

conclusion that this service does not represent a substitute service for ADSL access over

twisted-pair copper wire, which is mostly used by private users.

4.1.2.3. Fixed wireless access

4.1.2.3.1.Fixed wireless access over the Homebox service

HT thinks that the Agency incorrectly included the Homebox service into fixed wireless

access. Homebox service is provided on the basis of a technology used in mobile networks,



107

and, for that reason HT thinks that the Homebox service should be considered in the part on

mobile Internet access.

The Agency regards Homebox service as a service provided by means of fixed access to the

telecommunications network with the use of the radio-frequency spectrum intended for

mobile networks GSM and UMTS, that is, it is a service of fixed wireless access in the mobile

telecommunications network with the use of the radio-frequency spectrum. As a result, and

considering the definition of the service in question, HT’s proposal that this service should be

regarded as a mobile access service is unfounded. Therefore, if the Agency accepted HT’s

proposal that this service may not be regarded as mobile access service, the Agency would not

be consistent in its positions. It must also be emphasised that HT’s service of fixed GSM

access (FGSM) is also regarded as fixed wireless access service and it uses GSM frequencies

i.e. mobile network in other to access a fixed network.

In relation to other HT’s comments concerning fixed wireless access over Homebox service,

which are identical to comments related to mobile access, the Agency refers to explanation

given in this part of the answers to comments. Furthermore, the reply to HT’s comment that

the Agency did not describe in detail the conduct of the hypothetic monopolist test is given by

the Agency on page 98 of this document in the part of the answers concerning hypothetic

monopolist test.

4.1.2.3.2. Fixed wireless access over WIMAX technology

HT thinks that the Agency made a wrong conclusion that access over WIMAX technology

and ADSL access over twisted-pair copper wire may not be regarded as substitute services

and that the Agency does not systematically apply adequate and equivalent criteria to

establish whether individual services may be regarded as substitute services from the retail

aspect.

It must be emphasised that the Agency used a series of criteria to establish whether a certain

service represents a substitute service for ADSL access over twisted-pair copper wire,

although the most important criteria on the basis of which the Agency established the

substitutability of services were – price and functionality. In this case the Agency considered

the number of users of the broadband Internet access service over WiMAX technology as one

of the indicators together with problems faced by operators when introducing WiMAX

technology, and, on the basis of this, it concluded that, in the time period covered by this

analysis, due to the mentioned problems (lack of standards, expensive terminal equipment,

insufficient quality), the service in question will not have a significant number of users of

broadband Internet access. However, the Agency will, as it already stated in the document,

continue to follow further impact of this service on the broadband Internet access in the

future.

4.1.2.5. Access over leased lines

HT thinks that precisely because of its functionality, that is, because it allows high speed and

continuous Internet access, the service of access over leased lines represents a substitute

service for ADSL access over twisted-pair copper wire.

The Agency may agree that access over leased lines, considering its functionality, could

represent a substitute service for ADSL access over twisted-pair copper wire. However,



108

precisely because of this functionality, that is, because of the fact that the users of service of

access over leased lines have better quality and more possibilities when using the service,

there is a significant price difference. Because of this significant price difference, the majority

of users are not, that is, would not be interested in the above-mentioned services, except for

big corporate users, since they are not prepared to pay for functionality which they in reality

do not even need. Furthermore, according to the Recommendation on relevant markets and

the European practice, leased lines represent a separate relevant market.

4.1.2.6. Access over optical cables

HT thinks, on the basis of criteria such as price and availability that the service of access over

optical cables is not, and may not be, substitutable with the service based on copper

infrastructure. More details can be found in the part of HT’s comments referring to regulatory

obligations proposed by the Agency.

In the first place, the comment of H1 telecom needs to be mentioned saying that the concept

of „optical cable“ compared to „twisted copper pair“needs to be explained because a twisted

copper pair is a constituent part of a copper cable, and the question is why access will be

made over optical cables (to one user with more fibres). The Agency accepted the proposal of

H1 telekom, and in the entire document, the concept „optical cable“ was, where appropriate,

replaced by the concept „optical fibre“.

On the basis of the conducted analysis and HT’s plans and announcements about the

introduction of infrastructure based on FttH/FttB solutions – fibre to the home / fibre to the

building and the connection of 50,000 users by the end of 200990

, the Agency thinks that

services of broadband Internet access over optical fibre will have a significant influence on

competition at the retail level already this year. In other words, these services will be

substitutable with the existing services based on ADSL technology because they will satisfy

the need of users for more quality, faster and innovative services. Since optical fibres permit

higher transfer speed than DSL technologies, which enables the provision of high-quality

services and supports advance IP applications, such as, for example, HDTV (High Definition

Television), the Agency expects an increase in the number of end users to whom the operators

will provide the service of broadband Internet access over optical fibre, that is, the number of

end users who will be willing to pay a higher price for a more quality service. Therefore, the

Agency still thinks that the service of broadband Internet access over optical fibre is a

substitute service for ADSL access over twisted-pair copper wire.

It must be emphasised once again that, while conducting the analysis of impacts and market

development, the Agency took into account the expected market development (so-called

forward-looking principle), which is also recognised by the European Commission and by

other regulatory authorities when regulating the market in question.

4.1.6. Conclusion on the relevant market in the dimension of services

90

90

Lider, 24/04/2009



109

Concerning HT’s comment that the service of unbundled access to the local sub-loop may not

be a part of the relevant market because there is no such service in HT’s electronic

communications network due to HT’s specific network infrastructure, the Agency maintains

its position concerning VDSL access over twisted-pair copper wire referred to in p. 99 of this

document. Therefore, the Agency dismisses as incorrect HT’s claims that the service of

unbundled access to the local sub-loop may not be a part of the relevant market because there

is no such service in HT’s electronic communications network due to HT’s specific network.

The Agency thinks that further evolution scenario of broadband access networks based on

symmetrical pair must be based on the sub-loop unbundling concept with VDSL transfer

technology, which is the case in other European Union Member States.

Furthermore, HT thinks that the service of virtual collocation should not be a part of the

relevant market of wholesale (physical) access at a fixed location because this service has not

been sufficiently clearly defined and there are no significant examples in the practice of EU

countries. HT also stated that it did not receive any requests from beneficiaries for the

provision of such a service meaning that there is no need for such a service.

The Agency finds HT’s comments concerning the service of virtual collocation vague and

general. The service of virtual collocation has been defined in the market analysis, in the

Ordinance on reference offers and in HT’s RIO for the service of unbundled access to the

local loop as a collocation at the premises of the operator offering the service of collocation

and the beneficiary does not have access to the equipment necessary for the service of

unbundled access to the local loop but this equipment is accommodated, installed, maintained

and run exclusively by the operator offering the collocation service. Article 6 of the

Ordinance on reference offers also prescribes the basic content of reference offers, and the

service of virtual collocation makes a constituent part of the reference offer for unbundled

access to the local loop and related facilities.

It must be emphasised that HT had no comments or objections to the service of virtual

collocation during public consultation on the Ordinance on reference offers, and therefore the

Agency does not understand why it has the need to comment now. Furthermore, pursuant to

the Regulation (EC) 2887/2000 of the European Parliament and the Council of 18 December

2000 on unbundled access to the local loop, the service of virtual collocation has been defined

as a constituent part of the collocation services, that is, of the service of unbundled access to

the local loop.


The service of unbundled access to the local loop based on advanced technical solutions in the

access network (Fiber to the Cabinet)- unbundled access to the local loop.

HT disagrees with the Agency’s conclusion that the service of unbundled access to the local

loop based on the concept of optical fibre to the street cabinet (Fiber to the Cabinet) may be

regarded as a substitute service for the service of wholesale (physical) network infrastructure

access (including shared or fully unbundled access) at a fixed location. HT claims that the

Agency did not take into account the configuration of HT’s network or the fact that this is the

reason why the service of unbundled access to the local sub-loop does not exist at the

wholesale level since it is not technically feasible to shorten the twisted copper pair and install

street cabinets. HT also stresses that the Agency did not take into account the principle of



110

proportionality because the costs of necessary investments exceed the benefits that could be

achieved.

Concerning the above-mentioned comment, the Agency refers to the explanations provided in

the part of answers to the comments concerning VDSL access over twisted-pair copper wire

on page 99 of this document.

5.2. Control of infrastructure in case of significant problems for infrastructure competition

HT states, quote: „building a new one and/or extending the existing network regardless of the

used technology (copper or optic) is difficult for HT for the same reasons for which it is

difficult for new operators and represents high sunk costs for HT as well “. HT disagrees with

the Agency’s claim that investments into new generation networks, that is, the running of

optical cables through within the existing access infrastructure to the street cabinet or to the

end user’s premises, represents a small share in total costs of the building of access

infrastructure while costs of civil engineering works make up about 50-80% in total costs of

building access infrastructure. Having in mind the institute of sharing of the existing

infrastructure, alternative operators have, as opposed to HT, additional possibilities to reduce

costs of civil engineering works precisely by using the existing HT’s infrastructure.

Therefore, HT thinks that in the relevant market: “because of the legal obligation to allow the

sharing of existing infrastructure, control of infrastructure does not represent a significant

competition problem for HT’s competitors“. HT also disagrees with the Agency’s claim about

the strengthening of position in the relevant market by investing into the access optical

network because the capacity for running new cables though the existing infrastructure is very

limited as a result of the unresolved situation in the existing infrastructure which results from

unauthorised use of the infrastructure by other operators and inefficient sanctioning of such

behaviour by competent authorities. Therefore, HT states that, concerning new investments

into the access optical network, HT has to start from the very beginning. Since operators

already have already placed an optical network through the existing HT’s electronic

communications equipment and associated facilities, it may be concluded that they have a

certain advantage in relation to HT.

The Agency disagrees with HT’s claim in relation to the equality of position, that is, of the

existing HT’s„situation“ and the situation of new operators in relation to the rolling out of the

new optical access network. Concerning the rolling out of a completely new electronic

communications infrastructure and networks, HT and new operators are equal in terms of

costs and return on investment, but HT is at a significant advantage if it uses the existing

routes because it does not have to obtain any building permits. HT has only costs of

construction, extension and material, and new operators have additional costs for payment of

lease for free space and costs related to the contracting of the lease. HT currently possesses

many kilometres of access infrastructure while new operators have to either lease the ducts

from HT or roll out their own access infrastructure. When building infrastructure, the costs of

civil engineering works make 50-80% of total costs of rolling out access infrastructure

(Explanatory memorandum p. 17).

Furthermore, HT disposes of the infrastructure enabling access over twisted-pair copper wire

to a large number of end users in the Republic of Croatia, even in those territories where



111

access to end users is difficult. The Agency therefore thinks that investments into optical

access network will allow HT to strengthen its market position since in most cases it already

has a built access infrastructure through which it will run optical fibre-based access network,

which puts it at an advantage compared to new operators, meaning that HT’s claim that

concerning new investments into optical access network, it has to start from the very

beginning is unfounded. Consequently, the Agency thinks that in the period covered by this

analysis no operator will be able to replicate HT’s network infrastructure and thus endanger

its market position in the relevant wholesale (physical) network infrastructure access at a

fixed location.

Further to HT’s claims of a very limited capacity for the running of new cables though the

existing infrastructure because of an unclear situation in the existing infrastructure, the

Agency thinks that there is still enough free space in the existing infrastructure but HT has to

start applying new building technologies which significantly increase the rationality of use.

The Agency is stimulating and imposing such innovations in the Ordinance on the manner

and conditions of access and sharing of electronic communications infrastructure and

associated facilities for the purpose of promoting competition.

It follows that HT’s claim that it might be concluded that new operators have a certain

advantage because they have already placed an optical network through the existing HT’s

electronic communications infrastructure is completely unfounded. HT states in its comments

that new operators possess about 5,000 km of their own infrastructure while on the other hand

HT has significantly more kilometres of optical network and this number is, in accordance

with the published plans, increasing at a rapid pace. Also, in case of comparison of the size of

optical networks, in this case only the access part of the network should be compared.

In conclusion, the Agency thinks that, on the basis of infrastructure control, HT will

additionally strengthen its market position by investing into the optical access network.

5.6. Level of vertical integration

HT disagrees with the Agency’s claim that vertical integration and control over infrastructure

permit, in the absence of regulation, the abuse of significant market power, and it claims that

this means that ex ante regulation is necessary in any market where there is a vertically

integrated operator. HT stresses that vertically integrated operators exist in other activities as

well and the abuse of significant market power is prevented by means of the institute of

prohibition of abuse of the dominant position in the relevant market through the application of

general competition regulations.

The Agency insists that the assessment of the existence of one or more operators with

significant market power is a constituent part of the market analysis procedure. The

designation of SMP operators is, in addition to the calculation of the market share on the

relevant market, based on the application of various criteria laid down in Article 55,

paragraph 3 of the ECA, one of which is the level of vertical integration.

The Agency assessed that HT had significant market power on the basis of a high market

share which was stable in the observed period and amounted to 100%. However, since HT is a

vertically integrated operator active on the relevant market of wholesale (physical) network

infrastructure access (including shared or fully unbundled access) at a fixed location, and on



112

the retail broadband Internet access market, and taking into account the fact that a company

Iskon Internet d.d., which is 100%-owned by HT, is also active on this retail market, the

Agency has based its conclusion on the existence of significant market power, among other

things, on a high level of vertical integration that HT has on the relevant market in question.

Therefore, HT makes an unsubstantiated claim that it may be concluded from the Agency’s

statements that ex ante regulation is necessary on any market on which there is a vertically

integrated operator since the level of vertical integration is only one of the criteria on the basis

of which the Agency concluded that HT had significant market power on the relevant market,

as it was stated in Chapter 5.7 of this document. It must also be emphasised that vertical

integration may not by itself be the only and sufficient criterion for the assessment of

significant market power. If that were the case, i.e., if vertical integration were the only

criterion, all operators with their own infrastructure would automatically be designated as

SMP operators.

6. Competition problems

HT states that the Agency only listed the possible competition problems, as theoretical

models, without concrete examples and links with particulars of the Croatian market of

wholesale (physical) access to network infrastructure (including shared and fully unbundled

access) at a fixed location and imposed all existing regulatory obligations accordingly. It also

mentions that claims such as “Without regulation, HT might abuse different forms of

unjustified requests to influence business decisions and costs ….“, „without regulation, HT

might ask for certain information from the potential and existing competitors …“ may not be

regarded as evidence of the existence of a competition problem or serve as an argument to

impose regulatory obligations because the Electronic Communications Act itself prescribes

that regulatory obligations must be based on the nature of the recognised market problem and

must be proportionate and justified depending the goal wished to be achieved by regulation.

HT underlines the following quote: „…according to the new regulatory framework, the need

for the imposition of a regulatory obligation needs to be proven, which the Agency did not do.

This may be supported by the European Commission Explanatory Memorandum

accompanying the Recommendation on relevant markets of December 2007, page 10, where it

is stated that anticipated events, which serve as a basis for regulatory decisions, must be

expected within a meaningful timeframe and on the basis of concrete elements (e.g. business

plans, investments made, new technologies being rolled out) rather than something which

may be theoretically possible.“ HT stresses that, when it comes to the imposition of new

regulatory obligations, the Agency must prove the existence of a concrete competition

problem, not only anticipate possible scenarios.

Further to the above-mentioned comment the Agency gives the following reply:

In order for the Agency to be able to fulfil its duties referred to in Article 56, paragraph 3 of

the ECA, that is, impose regulatory obligations on SMP operators on the basis of an

established market problem and according to the principle of proportionality, it must take into

account competition problems, which include the existing competition problems and the

anticipated problems that might appear if the Agency does not regulate the market in which it

established the existence of operators with significant market power. The identified market

problems represent an “illness” of the market, and regulatory obligations represent a “cure”



113

for the identified “illnesses”. The Agency must ensure the imposition only of those regulatory

obligations that are necessary for the resolution of certain market problems.

According to the principles of ex ante regulation, the Agency carried out an analysis of the

occurrence of possible problems. All problems dealt with in this document refer to HT’s

actual behaviour, possible behaviour and behaviour that HT might, because of its market

position, apply in practice. The objective of ex ante regulation is to prevent certain behaviours

of operators with significant market power. On the contrary, if the regulation concerned only

those behaviours that must first occur in practice, the regulator would always be a few steps

behind the SMP operator thus failing to fulfil the objective and purpose of regulation. Agency

also points out HT’s inconsistency. HT stated in this part that business plans are necessary as

evidence that certain behaviour would happen, while in case of the intent to regulate access

over optical fibre due to a pilot project of introduction of optical fibre to end users, HT

explains that this is not in compliance with practice. Therefore, HT is not consistent and

changes its position depending on the situation.

Furthermore, HT makes an incorrect claim that all possible competition problems have only

been listed in theory regardless of the actual situation. In Chapter 6.3 of this document the

Agency listed all possible problems identified in European regulatory practice, and in Chapter

6.3 of this document it provided detailed explanations which of the mentioned problems

might occur on the relevant market in question. Thus the Agency explained that nine different

problems might occur in the market of wholesale (physical) access to network infrastructure

at a fixed location. These problems might, each in its own way, slow down or completely

hinder further development of the electronic communications market in the Republic of

Croatia. This could happen because HT, as the SMP operator, might abuse its dominant

market position.

Taking all of this into account, the Agency has, on the basis of the principles of

proportionality and justification, imposed those regulatory obligations that will resolve all

problems that might occur in the market.

Consequently, the Agency thinks that it sufficiently elaborated on all of the problems, both

those that have already occurred in practice, and those that might, without regulation, occur

on the relevant market described in this document.

7. Regulation obligations of the SMP operator.

7.1.1. Obligation of access to, and use of, specific network facilities

HT stresses that the Agency must, when imposing obligations referred to in Article 61,

paragraph 3 of the ECA, in particular when assessing whether these obligations are

proportionate to regulatory principles and objectives referred to in Article 5 of the ECA, take

into account the criteria referred to in Article 61, paragraph 5 of the ECA.

The Agency has, when imposing obligations referred to in Article 61, paragraph 3 of the

ECA, as part of the obligation of access, been very careful to keep the obligations

proportionate to regulatory principles and objectives referred to in Article 5 of ECA, that is, it

took into account the criteria referred to in Article 61, paragraph 5 of the ECA. Considering

the degree of market development, the Agency feels that the service of unbundled access to

the local loop and all proposed obligations are technically and economically feasible, taking

into account the available capacity of the operator. Thus, for example, when the Agency



114

imposed the obligation of fully unbundled access to the local loop and local sub-loop, it first

analysed whether this obligation was technically and economically feasible and whether there

is sufficient capacity, which was finally supported by the statements in the analysis of this

relevant market.

The Agency also thinks that the ECA, other laws any bylaws (e.g. ordinances, general

business terms and conditions, the Civil Obligations Act) and reference offers, depending on

each individual case, ensure long-term protection of competition through rights and

obligations of every operator on the market and that every operator has equal opportunities to

the return on investment in a certain period of time (which is, for example, obvious when the

service of unbundled access to the fibre-based local loop was being imposed where the

Agency recognised that the wholesale price for unbundled access to the fibre-based local loop

must, in addition to costs, contain a reasonable rate of return on investments provided that it

depended on whether it was necessary to built new cable ducts or optical fibres run through

the existing cable dusts.

Furthermore, HT states that the Agency never explained the regulatory measure (“use of

specific network facilities”) i.e. it is not clear what this measure means and what are these

“specific network facilities” nor it explained the results of the Analysis it must conduct

pursuant to the above-mentioned Article 62, paragraph 2 of the ECA. For that reason, it is not

possible to verify whether this obligation is “proportionate and justified”.

The Agency pointed out that, pursuant to obligations referred to in Article 61 of the ECA, as

part of the obligation of access to and use of specific network facilities, it followed the

wording of the law. Therefore, paragraph 1 of Article 61 imposes the possibility to prescribe

“to meet reasonable requirements for access to and use of specific network elements and the

associated infrastructure and associated facilities “. Also, paragraph 3 of the above-

mentioned Article, among other things, prescribes the possibility of “access to specific

network facilities and/or equipment, including unbundled access to the local loop”.

It was the Agency’s intention on page 60 of this document to list all obligations imposed to

HT as part of the obligation of access pursuant to Article 61, paragraph 3 in relation to

paragraph 1 of the above-mentioned Article of the ECA followed by a detailed explanation of

each obligation on the basis of the above-mentioned legal basis. Therefore, the Agency

stresses that on p.61 of the analysis it explains in detail which obligation it imposes on HT

pursuant to Article 61, paragraph 3, item 1 of the ECA, that is, that it imposes on HT the

obligation to: …provide to other operators access to the unbundled copper-based local loop

and sub-loop and access to the unbundled fibre-based local loop by means of the point-to-

point link and access to related facilities necessary for full or shared unbundled access to the

local loop or sub-loop “.

However, in order to eliminate all possible ambiguities, the Agency amends the text of the

analysis on page 60 and replaces the text „to provide to a third party access to specific

network facilities and/or equipment, including unbundled access to the local loop and sub-

loop covered by the market definition in Chapter 4.3 of this document and access to related

facilities necessary for full and shared unbundled access to the local loop or sub-loop“, with

the text „to grant to a third party access to the local loop and sub-loop covered by the market

definition in Chapter 4.3 of this document, and access to related facilities necessary for full

and shared unbundled access to the local loop or sub-loop ;“.



115

Furthermore, HT states that the Agency does not explain the content of the proposed

obligation to allow grant access to operational support systems or similar software necessary

to ensure fair competition in the provision of services (p.61 of the document), and it is

therefore not clear to which “operational systems” this obligation refers.

This HT’s claim is unfounded because the Agency explained in detail on p. 65 of this

document which obligation it proposes for HT in accordance with Article 61, paragraph 3,

item 8 of the ECA, which refers to the granting of access to operational support systems or

similar software necessary to ensure fair competition in the provision of services. It is the

obligation to allow access to operational IT systems in accordance with international

standards, via WEB interface allowing access to certain information, which was mentioned by

the Agency in its analysis. .

Furthermore, the existing HT’s RIO for the service of unbundled access to the local loop

already allowed operators to have insight into the information in question over a WEB

interface. Furthermore, this is also necessary because the operator may follow its requests (the

process) such as, for example, request for the repair of a malfunction or a request for he

unbundling of the local loop allowing the operator to provide timely and accurate information

to its users. Therefore, the Agency thinks that this obligation should be kept.

Unbundled access to the local loop

HT thinks that the service of leasing dark fibre and leasing of wavelength should be exempt

from regulation by Agency since HT does not provide such services commercially to anybody

else. HT states that these leasing services are a novelty on the Croatian market and that, as

such, they should have the status of a new product.

The Agency disagrees with HT’s claims that this obligation is unfounded, disproportionate

and unjustified because it represents, as it is stated by HT, an usual way of regulating the

relevant market in individual EU countries (Portugal, Finland, Ireland, Denmark, Spain,

Belgium, Germany) and, if there is no room in cable ducts, the SMP operator must allow

access to all passive network parts (e.g. lease optical fibre without transfer equipment).

HR also did not explain why it is not technically feasible to lease optical fibre without transfer

equipment, that is, to ensure VVDM access over fibre used by HT for self-supply, but only

generally adds that it is not applicable in the Croatian electronic communications market

because HT does not offer this service at all to third parties on a commercial or regulated

basis. The fact that HZ does not offer this service to third parties is not a reason not to

regulate this service because this service is necessary to provide, in case of unbundled access

to the local loop, equivalent service as the one provide by HT to its retail arm. We would like

to add that these HT’s services will be obligatory in cases where the local sub-loom would be

unbundled, that is, where it installed its own street cabinet.

This HT’s views clearly show that HT advocates such an evolution scenario for the

development of broadband fibre access networks of new generation according to which every

operator must built its new network in one geographical area, while the Agency advocates the

concept of one single universal broadband access network which will satisfy the needs and

requirements of all operators on the market. Since the cost component of the building of

optical access network is not negligible compared to overall costs it follows that the evolution

concept of the development of the access network advocated by HT, that is, several access



116

networks in one geographical areas always ends up being more expensive than one single

network, which does not ensure the possibility for uses of services to enjoy the advantages in

terms of prices of services, that is, it does not contribute to competition in the provision of the

activity of electronic communications networks and services.

By imposing this obligation, the Agency wished to create preconditions for individual users to

get the type of broadband services that they otherwise would not be able to get thus extending

the availability of offer of broadband services to a larger number of users and contributing to

further liberalisation of the electronic communications market in the Republic of Croatia.

Therefore, in cases when the replacement of the copper wire by optical fibre in the access part

of the network is not economically justified, it is to be expected that the introduction of new

broadband services will be based on the concept of the shortening of the twisted copper pair

to the street cabinet or some other concentration point, which will allow other operators to

offer more advanced, more quality and innovative broadband services where economically

justified, while keeping their network integrity.

This allows users with a long local loop to use quality broadband services. The Agency thinks

that significant transfer capacity will remain unused if this issues is not adequately regulated,

and many users will not be satisfied with the level of offered broadband services.

It is important to mention here that the concept of sub-loop unbundling, that is, the shortening

of the local loop, serves to prepare the existing access network for the implementation of

VDSL2 transfer technology with DSM3. We would like to point out that more significant

impacts of increased access speed with the introduction of DSM3 may be expected in the

existing circumstances only on local loops which are shorter than 500 m.

Furthermore, HT finds the proposed obligation according to which HT must enable the

operator to install a street cabinet at some point of HT’s access network based on its business

decisions although HT does not have or does not plan to install its own street cabinet at this

point unjustified and disproportionate, and HT thinks that this obligation exceeds scope of

regulation and liberalisation of the relevant market.

By introducing his obligation the Agency the Agency wished to create preconditions for

individual users to get the type of broadband services that they otherwise would not be able to

get thus extending the availability of offer of broadband services to a larger number of users

and stimulating investments into the access segment of the network in order to contribute to

further liberalisation of the electronic communications market in the Republic of Croatia,

which is the Agency’s main task.

Therefore, in cases when the replacement of copper wire with optical fibre in the access part

of the network is not economically justified, it is to be expected that the introduction of new

broadband services will be based on the concept of the shortening of the copper wire and

replacement with an optical cable to the street cabinet or some other concentration point,

which will allow other operators to offer more advanced, more quality and innovative

broadband services where economically justified, while keeping their network integrity.

This allows users with a long local loop to use quality broadband services although HT does

not have or does not plan to install its street cabinet at this point

Furthermore, HT draws attention to the fact that there are no examples of this kind of

obligation in the practice of EU countries and that, quote: „HT would be obliged to intervene



117

in its network at points indicated by the beneficiary regardless of the HT’s network structure,

and it may be concluded that beneficiaries would de facto be running the network, and not HT

as the infrastructure operator..“

The Agency finds these comments completely unreasonable. It must be taken into account

that, through this obligation, the Agency envisaged the possibility for the operators to install a

street cabinet at some point of HT’s access network, under supervision of HT’s employees,

provided that the location where the beneficiary will install the street cabinet complies with

certain technical requirements (agreed with HT), and the equipment installed in the cabinet

completely protects network integrity (in agreement with HT), that is, it does not cause the

degradation of services provided from the local exchange.

Taking into account the number of users that may be covered by a sub-loop it is to be

expected that in certain locations there will be no business plans for two operators at the same

sub-loop location. For this reason, and if operators are allowed to go only where HT has

already installed its street cabinet, the service of unbundled access to the local loop will not

become functional. However, the manner proposed by the Agency creates a possibility for the

functioning of the provision of services over unbundled access to the local loop because

alternative operators will profit from engaging into this business operation.

Furthermore, HT thinks that the obligation of providing access to the local sub-loop (which

implies the necessary building of sub-loops) is unjustified because the building of street

cabinets will not result in greater access speed..

This HT’s claim is completely technically unjustified because it has been proven that the

introduction of VDSL technology, which is one of the technologies allowing the realisation of

the FttCab concept, offers the greatest access speed among all DSL technologies. The

equivalent of VDSL2 is a transfer service supporting transfer speed of 100 Mbit/s in both

directions in the range of 300m. This technology also represents a logical evolution step in the

development of DSL technologies since end users are becoming increasingly demanding in

relation to transfer speed. In this scenario, ADSL (with its variants ADSL2 and ADSL2+)

might perform poorly in a complex environment requiring simultaneous transfer of voice

technology, interactive video and fast data services. In such network scenarios, where

operators prefer a combination of optical fibre and copper wire, VDSL becomes a logical

choice.

HT states that, quote: „the benefits from the introduction of street cabinets into the existing

copper network would be only incremental, while total costs necessary for the introduction of

street cabinets in the entire network, which would be borne by alternative operators, would

amount to almost HRK 900 million.“ In this respect, HT thinks that alternative operators who

will have to bear all the expenses will not have neither interest nor need to access the local

sub-loop in this manner considering other, more affordable types of network access.

The Agency stresses that operators will be able to choose on the basis of their business

decisions and economic cost-effectiveness, and it is not HT who will assess whether

alternative operators will have interest or need in accessing the local loop in this manner

considering that there are other, more affordable types of network access. When imposing

regulatory obligations the Agency must make sure that they are justified and proportionate.

Taking into account what was mentioned and the fact that, if no operator requests this service,



118

HT will not incur any costs. In conclusion, the Agency finds it justified to guide the market to

develop in the direction defined in this document.

Details on regulation of optical access network

The Agency replies to a part of HT’s comment Details on regulation of optical access

network, on pages 73 to 78 of the comments on the market of Wholesale Physical Network

Infrastructure Access.

The Agency agrees that optical access network is necessary for further development of

electronic communications services but it is also necessary to create such market conditions

that will not lead to distortion or hindering of competition in the electronic communications

sector.

The Agency agrees with HT’s standpoint that demand for greater access speed will increase in

the future, and such access speed will not be achievable with copper-based technologies

currently used by HT but it also stresses that the introduction of VDSL technology and the

application of dynamic spectrum management may significantly improve the performance of

the existing copper network, which will co-exist with the introduction of the optical access

network for a longer period of time. Furthermore, the chart on p. 75 of HT’s comments

recognises the Agency’s ideas, and presents a logical evolution of technologies. It is

unrealistic to expect that the existing copper infrastructure will be replaced by optical

infrastructure up to the end users in a short period of time, which, naturally, means that

parallel systems will continue to co-exist for some time.

HT stresses that optical access network still has not been rolled out at this moment and the

traditional copper access network is still being used both on the retail and on the wholesale

markets, which is why the optical access network does not represent a bottleneck facility, that

is, access to this network may not be imposed by a regulatory obligation at this moment.

In reply, the Agency stresses that it is trying to anticipate market development and, despite the

fact that optical access network currently does not represent a bottleneck facility because it is

still not rolled out to such extent as the copper access network, the Agency wishes to prevent

the occurrence of a bottleneck facility on the basis of HT’s business plans and anticipated

market development and thus avoid the occurrence of competition problems on the market of

wholesale (physical) network infrastructure access in the future, without regulation.

Furthermore, HT makes a unclear comment when it states that an operator may replicate the

entire HT’s retail offer by using wholesale services based on copper network for which

regulatory obligations already exist (access to the unbundled local loop, bitstream), regardless

of the fact whether HT provides services to end users over copper or fibre network, when

there is no adequate wholesale service over fibre network. It is well-known that services

provided over fibre network will be of better quality, more reliable and significantly faster,

and operators will not be able to adequately compete with HT on the basis of existing

wholesale offers, which may lead to the re-establishment of monopoly. In this situation, HT

would be able to offer the transmission of mutichannel HDTV, video on demand,

videoconferences and voice over the Internet protocol (VoIP) and other broadband services of

adequate quality, while other operators would not be able to provide equivalent services of

equivalent quality over copper infrastructure. This would lead to the strengthening of HT’s



119

market position at the retail level of broadband Internet access service and result in the

withdrawal of other operators from the market and in the re-establishment of HT’s monopoly.

HT expects that the Agency will pay attention to the division of risk between HT and users of

wholesale offers of access to optical network which includes the setting of cost-oriented

prices of wholesale services with a reasonable rate of return on investment regardless of

prices of retail services based on this network. Therefore, HT stresses that potential

regulation of wholesale services over optical cables should reflect the following principles in

price calculation: cost-plus, risk sharing and value based pricing.

The Agency insists that it did not define the price of method of calculating wholesale access

over optical network but it left HT the possibility to set prices that will then be analysed by

the Agency taking into account the proposed calculation and pricing principles.

Concerning HT’s proposal that public consultation on optical network should start only in

2010, by accepting this proposal the Agency would ensure to HT the first mover advantage

thus restricting competition in the electronic communication sector and causing irreparable

negative effects on the market since, according to HT’s announcements, HT will introduce

Internet based on optical network into 50,000 households by the end of 200991

. In this

manner, HT actually proposes a “regulatory break” in relation to optical network, while, on

the other hand, it is a well-known fact that the European Commission initiated misdemeanour

proceedings against Germany92

because of amendments of the German telecommunication

slaw which, according to the European Commission, provides for a “regulatory break” in

relation to the replacement of a part of copper infrastructure with optical infrastructure and

implementation of VDSL by Deutsche Telekom.

Therefore, the Agency has an important goal to prevent HT from abusing the first mover

advantage and thus to prevent distortion or hindering of competition in the electronic

communications sector and to ensure to users of the service the possibility to choose services

on the basis of price and quality. Without a timely and effective reaction of the regulatory the

implementation of new access networks may significantly endanger the already limited level

of competition in the access network.

In relation to HT’s comment on the proposal of the obligation according to which HT would

not allowed to offer at the retail level services based on FttX concept, i.e. unbundled access to

the local sub-loop and unbundled access to the fibre-based local loop by means of point-to-

point link, before offering them at the wholesale level because in this results in indirect

regulation of the retail market of services based on the FttX concept, the Agency gives the

following reply:

The Agency thinks that the imposition of this obligation does not result in the imposition of

regulatory obligations on the retail market but allows HT to provide to other operators, on the

basis of wholesale offers, services equivalent to those provided for self-supply, that is, to its

retail arm and to its affiliate companies, in accordance with the obligation of non-

discrimination imposed by the Agency on HT: In other words, other operators have the

possibility to offer to end users on the retail market which is not subject to regulation services

of equivalent quality at the same time as HT. Otherwise, HT would be able to abuse a

91

Lider, 24.04.2009. 92

Cullen International; Flash Message 73/2007; June 28, 2007



120

significant first mover advantage which would prevent other operators from acquiring a

sufficient user base to stimulate them to replicate HT’s network, and to make profit at the

same time, and this might, in turn, lead to the re-establishment of monopoly. This could

happen because HT has a large user database and a considerable financial strength, including

the ability to invest into marketing. Furthermore, since contracts with end uses are concluded

for a period of 24 months, this allows HT to collect a significant database of users of

broadband Internet access over optical fibre leaving other operators with a meagre chance for

an economically cost-effective replication of HT’s network.

Therefore, an important Agency’s objective is to prevent HT from abusing the first mover

advantage and thus prevent the distortion or hindering of competition in the field of electronic

communications and allow to end users the choice of type, price and quality of service.

Without a timely and efficient reaction by the regulatory authority the implementation of new

generation access networks may significantly threaten the already limited competition in the

access network. By efficient regulation at wholesale level, the Agency wants to ensure

competition at the retail level.

Consequently, the Agency feels that, in accordance with the obligation of non-discrimination,

HT, as the incumbent, an operator with significant market power and a vertically integrated

operator, has to show in a transparent manner, that is, publicly announce, that it is switching

to a new generation network (NGA).

Furthermore, HT stresses that this obligation would also result in the blockage of HT’s

business for an unspecified period of time because this kind of regulatory obligation would

restrict HT from providing advanced retail services for as long as there is no demand for such

an offer at wholesale level, that is, the provision of services at the retail level would be

conditioned by the degree of technical development of beneficiaries.

.

The Agency finds this claim unjustified because HT may start offering services based on FttX

concept at the retail level after having prepared an adequate wholesale offer based on the FttX

concept under conditions equivalent to those offered for its won retail services at a reasonable

price. This will prevent the abuse of the first mover advantage of HT and the distortion of

competition.

However, since regulatory obligations must be proportionate and justified, the Agency thinks

that the above-mentioned obligation must be imposed on HT on the wholesale broadband

access market by obliging it to provide bitstream access service at IP level based on FttX

concept and not the corresponding wholesale service on this relevant market as it was

originally proposed. HT must offer the corresponding wholesale services on this relevant

market, that is, unbundled access to the local sub-loop and to the fibre-based local loop by

means of point-to-point link upon a reasonable request.

Additional comments on other issues concerning the obligation of access to, and use of,

specific network facilities

HT thinks that the obligation to ensure the collocation and other forms of sharing of electronic

communications infrastructure and associated facilities is superfluous because this is a legal

obligation binding on all infrastructure operators in the territory of the Republic of Croatia

and that this obligation does not have to be emphasised in relation to the operator with

significant market power.



121

HT makes an unfounded claim about the “unnecessary stressing”, that is, imposition on the

SMP operator of the obligation to “ensure collocation and other forms of sharing of

electronic communications infrastructure and associated facilities”. Article 30, paragraph 2

of the ECA prescribes the obligation of infrastructure operators to allow to the beneficiary

operator, for a fee and on the basis of a concluded contract, access to and sharing of its

electronic communications infrastructure and associated facilities provided that the relevant

conditions for access and sharing laid down in the Ordinance on the manner and conditions of

access to and sharing of electronic communications infrastructure and associated facilities

(OG 154/08). Consequently, and considering the existing situation in terms of sharing of

electronic communications infrastructure and associated facilities, the Agency finds it

justified to impose the obligation in question on HT as the SMP operator since the imposition

of such an obligation enables the realisation of regulatory principles and objectives of the

Agency. The Agency thinks that this obligation should make a constituent part of regulatory

obligations resulting from this market analysis. The above-mentioned obligation is aimed at

ensuring beneficiaries access to distribution channels and collocation services, and the

transparency of all obligations on the relevant market.

Furthermore, HT thinks that the Agency’s proposal “concerning the imposition of the

obligation not to withdraw the already granted access to the local loop” is not clear. HT

thinks that this obligation may refer only to the existing unbundled access to the local loop

because any other interpretation might have negative consequences in the sense of limiting the

interests of HT’s end users bearing in mind the development of technologies and the need for

modernisation of the existing network. HT thinks that this obligation may not influence HT’s

right to replace the existing copper infrastructure with optical infrastructure, that is, that it

may not be interpreted as the obligation for HT to permanently keep and maintain two parallel

network systems – one based on copper and the other one on optics. HT stresses that

migration will be necessary and that every operator, even operators using the network, will

have to, in case of migration, bear all costs resulting from such migration.

As a result, the Agency gives the following reply:

New operators have already invested funds to connect the end users via the already granted

unbundled access to the local loop and the withdrawal of the already granted access would

result in the loss of the operators’ market share and their withdrawal from the market. This

would be at the detriment of end users since they would be forced to find a new operator.

Therefore, the Agency finds it necessary to the Agency thinks that the already granted access

must be ensured or a corresponding substitute access in order to preserve the continuity of

provision of services by the operator and the possibility of the operator to compete on the

market and in the NGA context, that is, regardless of the changes in the existing network

infrastructure and access technologies towards the end user, except if operators agree upon a

certain form of migration..

In case of lack of agreement between operators, HT must notify the operators and the Agency

at least five years in advance the intention to completely remove the existing network so that

they could have enough time to plan alternative access to the end user

For that reason the Agency incorporates the following text in Chapter 7.1.1. Obligation of

access to, and use of, specific network facilities: „HT may not withdraw the already granted

access unless the operators agree on some form of migration. Lacking agreement between



122

operators, HT must notify the user-operators at least five years in advance of the complete

termination f the existing access network in order to give them enough time to plan an

alternative access to end users. This is necessary in order to maintain continuity in the

provision of service of an operator and the possibility for the operator to continue competing

in the market and in the NGA context.”

Furthermore, considering the obligation to grant access to operational support systems or

similar HT’s software systems, HT finds this obligations not only unclear but also not based

on the nature of the nature of the identified market problem on the concrete market the result

of which is that these obligations are not proportionate or justified in relation to regulatory

objectives that want to be achieved.

In relation to this comment, the Agency refers to explanations given in the part of the answers

to comments concerning the obligation to grant access to operational support systems and

similar software necessary to ensure fair competition in the provision of services on p.112 of

this document.

HT thinks that the increase of the monthly fee in case of delay with the delivery of the local

loop is inappropriate and unjustified, and it claims that the Agency completely ignores the fact

that it must, when imposing regulatory obligations and additionally requirements, take into

account that the obligations and additional requirements are proportionate and justified

considering the objectives that want to be achieved. HT states that an additional increase in

the percentage of the monthly fee paid by HT per a day of delay with the provision of service

is not justified because the Agency did not take into account the fact that a part of

responsibility for the delay in the provision of the service lies with the beneficiary as well.

.

When imposing regulatory obligations the Agency paid special attention to proportionality

and justification of obligations and additional requirements considering the objective that

wants to be achieved. In the current HT’s RIO for the service of unbundled access to the local

loop HT has prescribed obligations towards operators, such as the deliver of services of

collocation/extension of collocation, deliver of access to the unbundled local loop, repair of

malfunctions, and certain fees in case of violation of these obligations (non-compliance with

the set time limits). By delaying with the fulfilment of obligations referred to in Article 56,

paragraph 2 of the ECA, as the Agency already stated in its document, HT might restrict the

entry of new operators on the market and influence the business operators of the existing

operators because they depend on HT’s behaviour for the provision of their services, or it

might act in favour of its affiliated company.

Thus, in case of delay with the fulfilment of obligations, end users of beneficiary operators

would suffer and lose confidence in the quality of service of competitors, to their detriment

and for the benefit of HT. The disturbance of operators by not complying with obligations

within a certain time limit might be achieved by delayed realisation of unbundled access to

the local loop or provision of collocation services, and by delayed repair of malfunctions. The

Agency, therefore, thinks that this obligation will ensure compliance with prescribed HT’s

obligations within the set time limits and prevent HT’s possible behaviour as described in

Chapter 6.4.2.2 of this document.

It must also be emphasised that the payment of a delinquency fee also depends on the

behaviour or activities of HT. If HT will timely fulfil its obligations, it will not have to pay

any, not even increased fee, and therefore it is unnecessary to find unjustified the increase of



123

fees in case of non-compliance with the defined time limits. On the other hand, if the

responsibility for the delay lies with the beneficiary, HT is entitled by law to initiate disputes

before the regulatory in compliance with Article 20 of the ECA to protect its rights and

interests.

As a result, the Agency found it necessary to increase penalties in case of delay with the

deliver of an individual local loop to ensure that HT complies with prescribed time limits and

to enable operators to provide services to end users on time. It must be emphasised that, in

case of delay with the deliver of an individual local loop, the beneficiary operator, in addition

to actual damage, also has the damage of lost profits since continuous delays with the delivery

of individual local loops destroy the operator’s credibility.

Concerning the possible obligation to notify the Agency on all better conditions of SLA

(advanced SLA) that are possibly provided by HT to other operators on the basis of

commercial agreements, HT thinks that the imposition of such obligation is not justified or

legally founded. HT does not understand on the basis of which authority the Agency reserves

the right to control SLA conditions provided by HT on the basis of commercial agreements

which are subject to open competition since regulation by the Agency is possible only in the

absence of adequate competition on the concrete relevant market.

The Agency finds it justified to impose on HT the obligation to notify the Agency on all better

conditions of SLA (advanced SLA) provided by HT to other operators on the basis of

commercial agreements and stresses that this obligation is in compliance with the obligation

of non-discrimination. In this manner the Agency wishes to establish whether HT has ensured

equivalent conditions in equivalent circumstances to other undertakings providing equivalent

services, or, in other words, whether HT provides, in case of advanced SLA, such a level of

SLA to one operator for a certain price and to another operator for that same price. Therefore,

in order to prevent HT from ensuring better conditions of SLA to different operators at

different prices, in particular to its affiliated company, the Agency thinks it is justified and

legally founded, in accordance with the obligation of non-discrimination, to impose on HT the

above-mentioned obligation. However, the Agency thinks that it must be emphasised in the

text of the analysis that these obligation is imposed in accordance with the obligation of non-

discrimination which has already been imposed on HT and this document will be amended

accordingly.

7.1.2. Obligation of non-discrimination

HT finds that the proposed obligation to notify operators of all planned changes on the

network, that is, of all network modernisation designs by submitting all information in

equivalent time and of equivalent quality as those provided by HT it its retail arm and

affiliated companies is not based on the nature of a possibly identified problem on the relevant

market. HT stresses that it treats all operators in the relevant market in the same manner, and

this has been ensured by reference offers for individual services. Considering the availability

of all information, HT draws the Agency’s attention to the fact that operators now have, via

web interfaces, access to reports on the status of their requests and can easily find out, at any

time, whether their request is being process or whether it has been denied or accepted.

The Agency finds it necessary to oblige HT to notify all planned changes in the network so

that operators beneficiaries of the service of unbundled access to the local loop would be able

to timely react and adjust to the these changes that occurred, which allows them to timely

react at the retail level as well. Therefore, the Agency thinks that HT must be obliged to



124

notify operators on planned changes in certain parts of the network (except in case of

complete termination of the existing access network and switching to a new NGA network for

which a longer deadline has been defined earlier in the text) at least one year before starting to

implement these changes and that it must offer the corresponding wholesale service which

ensures sustainable competition to preserve the continuity in the provision of the operator’s

service and the possibility of the operator to continue competing in the market. The non-

provision of the above-mentioned information creates a real threat that HT might abuse the

first mover advantage and put its own retail arm and affiliated companies in a more

favourable position at the retail level compared to its existing and potential rivals, which

would result in the strengthening of HT’s market position and it would have a negative effect

on the efficiency of competition at the retail level.

investments into new generation networks result in the opening of new points of access and

closing of the existing ones, and the Agency thinks that HT might, without regulation,

withhold detailed and timely information on planned changes in the network from its existing

and potential competitors, which would have a negative impact on business plans and

investments of these operators because they would not be able to estimate the impact of such

changes on time and consider different possibilities of investing into their own network or

timely react at the retail level, to the detriment of end users..

The plans for the modernisation of the access network of the infrastructure operator such as:

opening of new access nodes, the rerouting of a part of the network to a new access node and

the similar must be carried out without threatening the existing services provided by

beneficiaries to their users i.e. the principles of spectrum compatibility in the access network

must be completely respected.

7.1.3. Obligation of transparency

HT finds that the proposed obligation to submit to the Agency detailed reports with all

relevant performance indicators and the obligation to grant to the Agency and other operators

access to the system/database used for calculating and archiving main performance indicators:

„is not founded on the nature of the identified market problem, and that it is not proportionate

or justified“. HT stresses that the above-mentioned Agency’s proposal exceeds legal

framework relating to the obligation of transparency and the scope of its competence. HT

states that the Agency proposes the obligation of delivery of the so-called performance

indicators and key performance indicators (KPI) without defining them or giving any other

explanation as to what data they should contain. The Agency also completely ignores the fact

that regulatory obligations must be proportionate and justified. Therefore, HT insists that it is

not acceptable to justify the imposition of such an obligation by claiming that it will have a

positive effect on HT’s business operations as well. Furthermore, the Agency proposes to HT

to deliver the so-called performance indicators and key performance indicators although

Article 59, paragraph 1 of ECA does not provide for such a regulatory obligation.

Furthermore, HT states that operators may create their own bases and monitor KPIs from the

basic report. It is, therefore, unacceptable to transfer this obligation on HT because it requires

additional human resources, time and money. In conclusion, the creation of new reports

means the definition of new processes and IT solutions the implementation of which last at

least 3-6 months which means that this obligation is neither justified nor proportionate to the

objective of regulation. HT also disagrees with the Agency’s proposal that HT must allow



125

operators access to systems used for calculating and archiving of data because this means

allowing access to HT’s operational systems. HT stresses that the reason for publishing

reports on HT’s website is unclear, or, more precisely, its purpose and objective are not clear.

Further to this comment the Agency states the following:

Pursuant to Article 58 of the ECA which imposes the obligation of transparency, the Agency

may, in accordance with the provisions of Article 56 of the ECA, impose on operators the

obligation for transparency in relation to interconnection and/or access requiring that certain

information is made publicly accessible, in particular:

• accounting information;

• technical specifications;

• network characteristics;

• terms and conditions for supply and use;

• prices.

This means that the Agency may determine which data must be made publicly available by

HT as the SMP operator. These data may, in particular, be data referred to in Article 58,

paragraph 1 of the ECA. In other words, in addition to data listed in the above-mentioned

provision of ECA; the Agency may define other data (clearly indicated by the phrase “certain

information”) which have to be made publicly available. Therefore, HT makes a wrong

interpretation that the Agency may impose on operators the obligation to make public only

data such as accounting information, technical specifications, network characteristics, terms

and conditions for supply and use and prices.

Forward to HT’s claims that the Agency does not clearly define or give any other explanation

what data key performance indicators should contain, the Agency refers to page 79 of this

document where it is clearly stated what should be contained by the KPI report.

Furthermore, in accordance with the ERG document Best practices on regulatory regimes, the

quality of service associated with wholesale access products is the key operational issue

because it has a direct impact on the service provided to the end user. The SMP operator may

use QoS parameters to provide more quality services for self-supply which may influence

competition at the retail level. Therefore, there must be a control system that will guarantee to

new operators that HT supplies them with wholesale services of equivalent quality to those

provided for its own needs. By discriminating the quality of wholesale service the operator

with significant market power has a direct influence on the quality of service provided to the

end user. Since the user is particularly sensitive to the quality of service, this might lead to

dissatisfaction and loss of confidence of end users into the operator offering the service.

Furthermore, the quality of service is an important factor when it comes to optimisation and

rationalisation of operators’ costs.



and a vertically integrated operator, might, without regulation, deny important information to

operators using or intending to use the wholesale service of unbundled access to the local loop

by not providing them with equally detailed information as those provided to its retail arm or

affiliated companies and/or by not providing the necessary information on time to allow the



126

beneficiary operator of the wholesale service to react on a downstream retail market and

compete with its retail arm or affiliated companies disposing of the necessary information.

Furthermore, investments into new generation networks result in the opening of new points of

access and the Agency thinks that HT might, without regulation, withhold detailed and timely

information on planned changes in the network from its existing and potential competitors,

which would have a negative impact on business plans and investments of these operators

because they would not be able to estimate the impact of such changes on time and consider

different possibilities of investing into their own network or timely react at the retail level. In

this manner, HT could abuse the first mover advantage and place its own retail arm and

affiliated companies into a more favourable position at the related retail market than the

existing and potential competitions. In other words, it might leverage its market power to the

downstream retail market.

For that reason the Agency imposed on HT the obligation to deliver detailed reports with all

relevant performance indicators in order to ensure the implementation of the obligation of

non-discrimination. KPI parameters should be publicly available on HT’s official website in

order to ensure an optimum level of transparency and confidence of operators into the

effectiveness of the obligation of non-discrimination. This also allows operators to

communicate with their own users in a transparent way.

By allowing operators to access KPI data related to their activities via a web interface, the

Agency had in mind an identical solution to the one already applied in practice by means of

an IT solution for operator using the service of unbundled access to the local loop. Therefore,

the Agency disagrees with HT’s claims that it actually requests access to HT’s operational

systems because it requests access to the already prepared report from the existing HT’s

systems with all relevant KPI indicators which does not endanger the confidentiality of HT’s

operational systems.

a) Unbundled access to copper-based local loop

HT thinks that the time limit for the publication of the reference offer for unbundled access to

the local loop and related facilities of 30 days from the entry into force of the decision

referred to in Article 56, paragraph 2 of the ECA too short because the Agency wishes to

include new technologies into the Reference Offer. HT stresses that the mere introduction of

changes into the existing HT’s RIO requires the minimum of 60 days.

The Agency insists that HT makes a wrong conclusion when it states that the deadline is too

short since the Agency wishes to include new technologies into the reference offer for

unbundled access to the local loop and related facilities since the Agency clearly specified for

each of the new technologies, that is, types of access, the time limit, starting from the receipt

of a reasonable request, for the definition of terms and conditions, time limits and prices of

the service based on each individual access in the reference offer for unbundled access to the

local loop and related facilities.

Furthermore, since HT already has RIO for the service of unbundled access to the local loop,

based on the obligations from the Telecommunications Act, the Agency agrees with HT

proposal of a minimum of 60 days for the introduction of changes into the existing Reference

Offer, taking into account the amount of changes arising from this document and the fact that

the text and content of the reference offer for unbundled access to the local loop must be



127

harmonised with regulatory obligations imposed in this document, and with the Ordinance on

reference offers. Therefore, the Agency thinks that 1 October 2009 is a sufficient time limit

for the publication of the reference offer for unbundled access to the local loop and related

facilities, which will include terms and conditions, time limits and prices of the service of

unbundled access to the copper-based local loop.

b) Unbundled access to the copper-based local sub-loop

HT disagrees with the proposed obligation to, within 90 days from the receipt of a reasonable

request for the service of unbundled access to the copper-based local sub-loop, specify terms

and conditions, time limits and prices of the service of unbundled access to the local sub-loop

sin the reference offer for unbundled access to the local loop and related facilities since HT

does not offer the service of unbundled access to the local sub-loop in its network. Therefore,

HT insists, it is not clear what would be the basis of this obligation because every regulatory

obligations must be based on the nature of the identified market problem.

Concerning the above-mentioned comment, the Agency refers to explanations given in the

part of answers to the comments concerning VDSL access over twisted-pair copper wire on

p.99 of this document.

c) Unbundled access to the fibre-based local sub-loop by means of a point-to-point link

HT disagrees with the proposed obligation to, within 90 days from the receipt of a reasonable

request for the service of unbundled access to the fibre-based local loop by means of a point-

to-point link, specify terms and conditions, time limits and prices of the service of unbundled

access to the fibre-based local loop by means of a point-to-point link in the reference offer for

unbundled access to the local loop and related facilities. HT thinks that this obligation is not

based on the nature of the identified market problem and it is therefore neither justified nor

proportionate in relation to regulatory objectives that want to be achieved. HT insists that the

Agency did not take into account necessary HT’s investments when imposing this obligation,

particularly investments into the emerging market and the possibility of a reasonable rate of

return on investments.

Also, HT stresses that the Agency did not take into account the fact that there are no examples

of regulation of unbundling of optical loop in the European practice. The Agency also failed

to take into account the fact that alternative operators have already run at least 7000 km of

optical cables meaning that they already have physical access to the end user and the

unbundling of the fibre-based loop is unnecessary.

In relation to this comment, the Agency refers to explanations given in the part of the answers

to HT’s comments Details on regulation of optical access network on p. 115 of this

document.

Furthermore, HT thinks that the obligation proposed by the Agency as part of the obligation

of transparency concerning the delivery, that is, the availability certain information and data,

referred to on p. 77 of this document, is not based on the nature of the identified problem. HT

stresses that it does not understand the concept of termination pairs and pairs termination

only on MDF and it, therefore, does not understand what this obligation refers to.



128

Concerning the above-mentioned HT’s comment, the number of active pairs is the total

number of pairs occupied by certain equipment and serving to provide the adequate user

services. The number of active pairs is, according to data collected in the questionnaire for the

market of wholesale (physical) network infrastructure access at a fixed location, amounted to

a bit over 1,700,000 at the end of the first half of 2008.

The number of termination pairs is the number of active pairs increased by the number of

available pairs, where it must be emphasised that pairs terminate on both sides, that is, on one

side on MDF and on the other on the distribution point in the vicinity of the user. Here it must

be emphasised that every available pair may become active with minimal investments (most

frequently it requires only the construction of the installation segment of the network). The

number of termination pairs in the Republic of Croatia amounts to around 3,600,000. This

number of pairs (with, possibly, a correction factor of 0.8), should be relevant when

calculating the percentage usage of the existing access network for broadband Internet access.

The collecting of data on the number of active pairs in the manner done by HT is not adequate

because it create an unrealistic and incorrect image of the saturation of the existing access

network , which, consequently, prevents the entry of new operators on the market.

The number of pair terminated only on MDF is the total number of pairs terminating on MDF

but they do not have to necessarily terminate on distribution points in the vicinity of end

users. This number, compared to the number of termination pairs takes into account reserves

in the underground network, which do not terminate on the side of users. These reserves may

become active with more investments that the ones in case of available pairs. The number of

pairs terminated only on MDF in the Republic of Croatia is much bigger than the number of

terminated pairs.

Furthermore, HT points out that it has been providing data on the number of active pairs for

years which means that this clearly does not represent a market problem that the obligation is

trying to fix. HT also currently delivers data on secondary equipment and provides on line

access to these data. Data on geographical coverage are delivered in the form of a street list,

and the planned network changes are delivered 6 months in advance. HT insists that it is clear

from the above the imposition of the above-mentioned obligations is neither justified not

proportionate to the regulation that wants to be achieved.

Although HT is obliged by the existing HT’s RIO for the service of unbundled access to the

local loop to deliver the above-mentioned data, the Agency thinks that this is necessary to

ensure that these obligations are fulfilled in a reasonable and fair manner and to prevent

possible lack of security as a consequence of non-imposition of this obligation. We also think

that this obligation does not represent an additional cost for HT because HT has been

providing other operators access to these data for years.

7.1.4. Price control and cost accounting obligation

d) Unbundled access to the fibre-based local sub-loop by means of a point-to-point link

HT thinks that the price control and cost accounting obligation proposed by the Agency on

page 87 in relation to unbundled access to the fibre-based local loop by means of a point-to-

point link is not proportionate and justified considering regulatory principles that want to be

achieved by the regulation of this relevant market. HT stresses that „a relatively small number

of unbundled fibre-based local loops by means of a point-to-point link, mostly for corporate



129

users, a very wide optical network rolled out by beneficiaries, and open access to the existing

electronic communications infrastructure lead to the conclusion that there are no obstacles

for beneficiaries to realise the services for corporate users over their own optical

infrastructure “. Therefore, HT states that the imposition of the obligation of unbundling of

the fibre loop by means of point-to-point link is not even necessary. Concerning the obligation

to maintain prices at such levels allowing the provision of the same service to other operators

without incurring losses, HT points out that the price must contain, in addition to the cost, the

division of risk which accompanies investments into new networks since this is an emerging

market and it is, therefore, necessary to ensure a reasonable rate of return on the invested

capital.

The Agency thinks that the wholesale price for the service of unbundled access to the local

loop must, in addition to costs, contain a reasonable rate of return on investments93

.

e) Collocation services

HT disagrees with the proposed obligation related to collocation services according to which

HT has to charge all prices related to collocation services in accordance with the regulatory

obligations of transparency, non-discrimination and cost orientation, in which case prices

have to be based on actual costs of provided services including a reasonable rate of return on

investments. HT also disagrees with the Agency’s proposal that the division of costs of

preparation of collocation premises and putting them at disposal remains the same as defined

in the Reference Offer for the service of unbundled access to the local loop. HT thinks that

this obligation is illegal because neither the previous law nor the currently valid ECA provide

for the possibility of regulation of the provision of collocation services as proposed by the

Agency and as currently resolved in the valid Reference Offer.

The Agency insists that the collocation service is important for the unbundling of the local

loop and as such must be regulated by the Agency in order to prevent the possibility of

leveraging HT’s significant market power from the relevant market covered by this document

to the downstream retail market by charging unjustified and unfounded costs of services.

The Agency proposed that the division of costs of preparation of collocation premises and

putting them at disposal remains the same as defined in the Reference Offer for the service of

unbundled access to the local loop (since the first Reference Offer from 2005) because the

changing of the above-mentioned obligation could only contribute to the increase of

regulatory unpredictability and insecurity since it already exists in practice. The Agency also

thinks that this is the best way to solve problems related to the division of costs of preparation

of collocation premises and putting them at disposal.

7.1.5. Obligation of accounting separation

Further to HT’s comment concerning the obligation of accounting separation, the Agency

gave the following reply.

The Council of the Croatian Agency for Telecommunications (predecessor of the Agency

pursuant to Article 131 of ECA) adopted a decision on 17 December 2007 (Class: 344-01/07-

93

The Agency thinks that the reasonable rate of return on invesetments does not have to be the same in all cases

but it will depend on whether new ducsts had to be built or optical fibre were run out through the existing ducts.



130

01/939; Reg.No: 376-11-1) announcing „A list of relevant markets and operators and

providers of telecommunications services with significant market power in these relevant

markets “ according to which HT is an operator with significant market power on the relevant

market of fixed public telephone networks services, on the interconnection market and on the

market of leased telecommunications lines. By designating a SMP operator, the lawmaker

must by force of law impose on HT in Article 57 of Telecommunications Act the obligation

of accounting separation and authorises the Agency’s Council to adopt a decision on the

manner of separation of business activities of the operator with significant market power in

terms of their organisation, accounting and other details related to the separation.

This means that HT incorrectly claims that the „obligation of accounting separation was

already imposed on HT by the decision of the Agency’s Council (Class: 130-01/06-01/09,

Reg.No: 376-11-18) of 18 November 2008 before carrying out market analysis procedure

which obviously is not an example of the best regulatory practice.“ since the Agency’s

Council adopted this decision to prescribe the manner of implementation of the above-

mentioned obligation while the obligation itself was imposed by force of law, ex lege, that is,

it follows from the provisions of the Telecommunications Act.

In relation to your claims concerning the public consultation on „Accounting separation and

cost accounting“, we would like to stress that this public consultation was held in order to

decide on the manner of implementation of accounting separation and cost accounting and the

goal of the market analysis procedure was to establish whether certain regulatory obligations,

including the accounting separation obligation, need to be changed, kept or withdrawn.

Taking this into account, and since it published the replies to all of the comments received

during public consultation on its website, the Agency deems it unnecessary to repeat the

comments.

.

The request not to apply the obligation of accounting separation to the market of wholesale

(physical) network infrastructure access at a fixed location which is elaborated only by

comparing it to the Agency’s conclusion given in the Analysis of the Market of Termination

of Calls in a Certain Public Mobile Communications is considered by the Agency as

insufficient because it does not prove why this obligation is not necessary. Every relevant

market has its peculiarities which the Agency recognised in the analysis procedure and

elaborated in detail. Then, on the basis of identified competition problems that might occur in

the absence of regulation in the time period covered by the analysis, it proposed the

corresponding regulatory obligations.

The Agency thinks that it is unfounded to base conclusions on the need to introduce a certain

regulatory obligation exclusively on final results of an analysis without taking into account

market peculiarities that caused them. The identified competition problems related to vertical

leveraging of significant market power on the market of voice call termination on individual

mobile networks are not equivalent to problems identified in the wholesale (physical) network

infrastructure access at a fixed location and, for that reason, the Agency proposed different

regulatory obligations.

The Agency also thinks that the regulatory obligation of accounting separation will resolve

the problem of cross-subsidising and ensure the implementation of obligation of non-

discrimination and transparency confirmed in the adopted ERG Opinion, which was published



131

in the document „Guidelines for implementing the Commission Recommendation C (2005)

3480 on Accounting Separation & Cost Accounting Systems under the regulatory framework

for electronic communications“. The Agency thinks that the analysis clearly shows the

advantages from implementing the obligation in question and the possible damage for the

development of competition that would result from the withdrawal of this obligation.

In conclusion the Agency finds it necessary to stress that the accounting separation method

applied by the Agency is in accordance with European regulatory practice and doe not see any

logical or justified reason why HT should doubt the credibility of the imposition of this

obligation.

8.2.2 Answers to VIPnet’s comments

Vipnet indicates the link between the market of wholesale (physical) network infrastructure

access at a fixed location and wholesale broadband access market and states that the Agency

concluded that these markets contain the service of ADSL access over twisted-pair copper

wire provided by HT for self-supply and the services of network infrastructure access over

twisted-pair copper wire provided by HT for self-supply, however, the difference between the

two services is not entirely clear, in other words, it is not clear whether the former services is

already contained in the latter one.

The Agency agrees that there is a link between two relevant markets and, precisely because of

that, and, according to the recommendation from the Explanatory Memorandum to analyse

these two markets together, that is, at the same time, the Agency initiated the analysis of

wholesale broadband access market at the same time as the analysis of the market of

wholesale network infrastructure access (including shared and fully unbundled access) at a

fixed location.

Services on the same retail market are provided on the basis of wholesale services arising

from these two markets, that is, operators beneficiaries of wholesale services which are a part

of these two relevant markets compete in the provision of the service of broadband Internet

access. Considering the coverage of HT’s network, it is necessary to consider the influence of

services provided by HT for self-supply in relation to wholesale services provided on the two

relevant markets in order to establish whether they should be included in the dimension of

these two relevant markets.

On the relevant market of wholesale (physical) network infrastructure access at a fixed

location the corresponding service provided by HT for self-supply is the service of physical

network infrastructure access provided by HT to its end users, that is, for self-supply. It is

therefore necessary to assess the influence of services of physical network infrastructure

access provided by HT to its end users to wholesale services which are a part of the relevant

market of wholesale (physical) network infrastructure access at a fixed location.

On the other hand, on the relevant broadband Internet access market the corresponding

service provided by HT for self-supply is the service of ADSL access over twisted-pair

copper wire provided by HT to its end users, that is, the service of wholesale broadband

access for self-supply, and it is necessary to establish the influence of this service on

wholesale services which are a part of the relevant market of broadband Internet access.



132

The Agency established the following on both relevant markets. If, in case of a hypothetical

price increase of wholesale services on these two relevant markets, beneficiary operators

transfer this higher price to the end users, their end users would switch to HT’s service

considering its network coverage. In that case, the dimension of the relevant market includes

HT’s service provided for self-supply, which corresponds to wholesale services on this

relevant market.

Furthermore, Vipnet asked a question related to the service of physical collocation – what

kind of regulatory measures does the Agency plan for cases when operators will no longer be

able to physically achieve collocation in HT domain.

The Agency envisaged regulatory measures that would ensure access to individual end users

and operators who will no longer be able to physically, due to lack of space, collocate, and it

elaborated these measures in detail in the documents on the analysis of the market of

wholesale (physical) network infrastructure access at a fixed location and broadband Internet

access market analysis. The Agency envisaged the following measures in these cases:

- service of distant collocation

- service of unbundled access to the local sub-loop

- bitstream access service.

HT currently ensures for operators the collocation service in order to provide to this operator

unbundled access to certain HT’s local loop at requested locations of HT’s main distribution

frame, including, among others, the service of distant collocation (collocation in premises or

street cabinets installed by the operator or leased on public or private property in the vicinity

of the location of HT’s main distribution frame). This means that, if physical or virtual

collocation requested by the operator is not possible on the location of the main distribution

frame, HT may deny the operator’s request for physical or virtual collocation but must ensure

to the operator the use of distant collocation. .

Furthermore, considering the stagnation, that is, the saturation of the existing available

physical collocations, the Agency enables operators to reach new users by introducing the

service of unbundled access to the local sub-loop (including more quality and faster services

over VDSL technologies), by building street cabinets and shortening of the copper wire,

which represents an upgrading of the copper-based network.

Furthermore, the Agency finds it very important to ensure in the upcoming period such

conditions in the reference offer for wholesale broadband Internet access that will ensure fair

and effective competition since, due to realistic, physical limitations to collocation of

equipment and the decreasing of the operator’s financial strength, an efficient reference offer

for broadband Internet access (bitstream access service at all three levels – DSLAM, Ethernet

and IP regardless of the access network – twisted-pair copper wire, FttH/FttB, FttCab) will

help prevent the distortion and hindering of competition in the electronic communications

sector.

Vipnet thinks that the restriction in the Reference Offer for the service of unbundled access to

the local loop concerning the prohibition of giving of realised unbundled local loops for use to

third parties should be removed, because the removal of this restriction would allow

alternative operators to provide the service of wholesale broadband access in its network to

third parties and thus compete with the wholesale service offered by HT.



133

The Agency thinks that there are not objective or technical reasons to prohibit the cession of

the leased pair, and it, therefore, accepts Vipnet’s proposal because the current situation

represents some kind of restriction on disposal of the leased pair by the alternative operator. It

is a fact that Reference Offer for the service of unbundled access to the local loop in Article

1.2 reads: “Services or parts of services which are a subject of this Reference Offer may not

be ceded to third parties before prior T-Com’ consent.” In other words, this reference offer

does not state that the cession of the pair to third parties is not possible due to the existence of

some technical restrictions but the cession is conditioned by HT’s decision (if the operator

gets HT’s consent, it may cede the pair to a third party), and, in this manner, HT has the

discretionary power to decide who will be granted consent.

The Agency finds this condition unnecessary because the relationship between HT and the

operator who conducted the unbundling of the local loop will remain the same. The operator

who unbundled the loop from HT still has to respect all provisions of the relevant reference

offer since this offer regulates only the wholesale relationship between HT and the alternative

operator, and this operator will be held responsible in case of non-compliance with the above-

mentioned provisions and not the third party to which the leased pair has been ceded. It must

be mentioned that the beneficiary of unbundled access to the local loop (lessee) who intents to

cede the pair to a third party (sub-lesee) must include in a contract al possible operational

activities that may arise during provision of such services. In other words, pursuant to the

provision of the Civil Obligations Act, Article 537, subleasing is possible only if it does not

cause damage to HT, that is, the beneficiary (lesee) of unbundled access to the local loop is

still responsible for proper use of the service of unbundled access to the local loop to HT

(lessor). For example, correspondence towards HT must still be carried out by the operator

beneficiary of the unbundled access to the local loop – notification of repair of malfunctions,

payment of the monthly fee. As a continuation of the previously mentioned beneficiary’s

responsibility, the beneficiary must at all times know which access speed is provided by the

sub-lesee over the leased pair (local loop unbundled by the beneficiary) and it must comply

with the provisions defined in the Static Plan for Frequency Spectrum Management and the

accompanying Pair Management Plan (obligation to publish the „ Static Plan for Frequency

Spectrum Management” and the accompanying Pair Management Plan has been defined as

part of the obligation of transparency in Chapter 7.1.3. of this document). Therefore, the

Agency accepts Vipnet’s proposal and will amend the text of the analysis accordingly.

Comment concerning the implementation of measure

Reference offers

Vipnet stresses that it is not completely clear from the document whether measures will enter

into force by the adoption of the Agency’s decision after public consultation or later after the

adoption of a new reference offer.

The Agency stresses that the regulatory obligations imposed on the SMP operators enter into

force with the adoption of the decision referred to in Article 56, paragraph 2 of the ECA.

However, the Agency defined in all documents on the analysis of each relevant market the

time limit for the SMP operator to incorporate certain terms and conditions, time limits and

prices into the corresponding reference offer.

In relation to Vipnet’s comment that the adoption of a new reference offer is a long-lasting

process, the Agency stressed that the process for the amendment of reference offers was



134

defined in the TA and was different from the one defined by the ECA. In accordance with the

ECA and the Ordinance on reference offers (OG 37/09), if the Agency, after having

conducted a market analysis procedure, which consists of the identification of relevant

markets and assessment whether there are one or more operators with significant market

power, during which established the lack of effective competition on the relevant market

which is a constituent part of the European Commission Recommendation on relevant

markets, adopts a decision on the designation of the SMP operator on this relevant market, the

Agency may impose on this operator a regulatory obligation of non-discrimination and the

obligation of transparency in relation to interconnection and/or access. The Agency may also

impose on the SMP operator who has been imposed the regulatory obligations of non-

discrimination and transparency, impose the obligation to publish the reference offer which

must contain time limits, terms and conditions and prices of services. The procedure for the

amendment of reference offers will be carried out by the Agency once a year, and,

exceptionally, several times a year. Therefore, the procedure for the amendment has been

defined in the Electronic Communications Act and the Ordinance on reference offers, and the

Agency has described this procedure in detail under the obligation of transparency.

Further to Vipnet’s comment that the reference offer is very comprehensive and non-

transparent and its proposal to summarise the offer to the most impotent details and important

conditions, the Agency gives the following reply.

The Agency thinks that the summarising to the most important details and important

conditions would not contribute to transparency and the implementation of the obligation of

non-discrimination, which is the main purpose of the reference offer. Furthermore, the basic

content of the reference offer, the level of detail, and the manner of its publication have been

prescribed by the Ordinance on reference offers.

Furthermore, considering Vipnet’s comment that public consultation in the process of

adoption of the reference offer might contribute to more effective implementation of

measures, the Agency stresses that operators had the opportunity, during public consultation

about the proposal for decisions referred to in Article 56, paragraph 2 of the ECA, give their

comments on regulatory obligations imposed on the SMP operator , including time emits,

terms and conditions and prices that the SMP operator must incorporate into the reference

offer.

Also, since the procedure for the amendment of reference offers for the purpose of

implementation of regulatory obligations imposed on the SMP operator is carried out by the

Agency, ex officio or upon the operator’s request, once a year, or, exceptionally several times

a year, and since the procedure is completed by a decision of the Agency’s Council, the

Agency shall, in accordance with its legal obligations and pursuant to Article 22, paragraph 1

of the ECA; publish the proposal of the decision of the Agency’s Council concerning the

procedure for the amendment of the reference offer for the purpose of public consultation so

that all interested parties may express their opinion and give comments and proposals.

Regulation on the basis of acquired experience

Vipnet states that more attention should be paid to the identification of remaining problems in

the use of service of wholesale broadband access, to assessing whether former regulatory

measures have yielded expected results, whether there were any disputes between operators

and how where these resolve, and which facts may help find new solutions that will

encourage the development of competitiveness on the retail market of services based on

broadband technologies. Furthermore, Vipnet finds the former model of disputes between



135

operators to be inefficient and thinks that operators need to resolve disputes in a more

efficient way, which should not include continuous amendments of reference offers.

The Agency thinks that all problems that have already occurred or that might occur without

regulation on relevant broadband Internet access markets have been explained in detail.

Before imposing regulatory obligations, the Agency must identify competition problems on

the relevant market since the identified competition problems represent an “illness” of the

market, and regulatory obligations represent a “cure” for the identified “illnesses”. The

Agency must ensure that only those regulatory obligations are imposed which are necessary to

deal with identified market problems and it used the principles of proportionality and

justification to impose those regulatory obligations which resolve all problems which already

have occurred or might occur on the market. The Agency thinks that by imposing regulatory

obligations which refer to wholesale broadband markets it found solutions for encouraging

competitions on the retail broadband Internet access market. Furthermore, in relation to more

efficient dispute resolution, the Agency insists that the purpose of a quality reference offer is

faster contract conclusion, prevention of discrimination and more efficient resolution of

possible disputes and the Agency stresses that all operators had the opportunity to give their

proposals and opinions on the proposed decisions referred to in Article 56, paragraph 2 of the

ECA aimed at preparing a quality and transparent offer. The same opportunity will be offered

during the procedure for amendments of the reference offer.

Prices

Concerning the prices of services, Vipnet states that the obligation of cost orientation of prices

for network access and the prohibition of cross subsidising are not explicitly mentioned in

proposals for decisions of the Agency defining regulatory measures.

Further to the above, the Agency mentions that it is clearly prescribed in Article 62 of the

ECA that the Agency may impose on operators obligations relating to cost recovery and price

controls, including obligations for cost-orientation of prices. Therefore, the Agency does not

see any justified reason to include this obligation in the text of the decision because this

Article includes the obligation of cost-orientation of prices in the manner prescribed by the

Agency.

Concerning your comment that the proposals for the Agency’s decisions do not contain the

prohibition of cross subsidising of services, we would like to point out that the Agency

imposed regulatory obligations in the above-mentioned proposals for decisions and not

market problems that need to be resolved by imposing these obligations. Since, pursuant to

Article 60, paragraph 2 of the ECA, unfair cross subsidisation may be prevented by imposing

the obligation of accounting separation, the Agency imposed on HT the obligation of

accounting separation.

Issue of leased lines

Vipnet proposes that the Agency should conduct the analysis of the market of leased lines as

soon as possible so that the dominant operator would establish a unified offer of lines on the

market which would not differentiate the lines by type and which would define the prices of

lines on the basis of cost-orientation.



136

The Agency mentions that meetings with fixed network operators were held in the period

between 1 and 3 July 2008 where schedule for market analysis procedures of individual

markets was agreed upon and established. All operators were informed about the Agency’s

plans concerning market analysis procedures for all seven relevant markets from the

Recommendation. Therefore, five (of seven) relevant markets susceptible to ex ante

regulation on which market analysis procedure will start have been defined in a decision of

the Agency’s Council of 7 July 200894

. The remaining two markets, among which the market

of wholesale terminating segments of leased lines, regardless of the technology used to

provide leased capacity, will be subsequently established by an Agency Council’s decision

before the start of market analysis procedure on these markets.

8.2.3 Answers to comments made by H1 Telekom

Answers to comments made by H1 Telekom follow the chapter numbers from the document

that H1 commented on.

4.1.3.1.1 Service of unbundled access to the local sub-loop based on FttCab solution

H1 Telekom points out that the shortening of the twisted copper pair in case of FTTB or

FTTH solution narrows down the market for the beneficiary using HT’s collocation, that is,

on the main distribution frame of the location, by taking a certain number of users down from

the access distribution frame at this collocation to transfer them to a cabinet where HT

installed its new DSLAM or other, which requires additional investments from beneficiaries

who want to have their former users close by.

The Agency stresses that it may not influence operators’ decisions to invest into their own

infrastructure, including by using FttCab concept to be able to provide the service of

broadband Internet access and associated facilities over VDSL technology to those end users

who need greater access speed.

The Agency’s objective is to encourage investments and modernisation of the access network.

Another objective is to ensure that other operators are able to continue providing services on

the basis of the existing wholesale services, at least in the period covered by this analysis, and

to provide to those operators new wholesale services based on FttCab or FttH solution in

order for them to be able to compete with the SMP operator in the provision of broadband

Internet access and convergent services. Therefore, the regulatory obligations proposed by the

Agency area aimed at preventing HT from withdrawing the already granted access and at

forcing it to offer wholesale services equivalent to those used by its own retail arm to provide

broadband Internet access and convergent services. It may, therefore, be concluded that H1

Telekom’s claims that the beneficiary will have to invest into shortening of the loop or loose

the user are unfounded because it is up to the beneficiary to decide whether to invest or

continue providing service from the local exchange (which will still be possible).

Furthermore, considering the Agency’s conclusion that the service of unbundled access to the

local loop based on FttCab solution is a substitute service for the service of unbundled access

to the copper-based local loop, H1 Telekom stresses that services are substitutable at the very

end not on the entire path to the user which must be ensured by the operator.

94

Class: UP/I-344-01/08-01/1582; Reg.No: 376-11-08-01



137

The Agency agrees with H1 Telekom’s opinion that the path to the end user in case of

unbundled access to the local sub-loop based on FttCab solution is not the same as in the case

of unbundled access to copper-based local loop, since in the case of unbundled access to the

local loop the beneficiary of the wholesale service in question must collocate its equipment

closer to the end user making the path to the street cabinet longer than the one to the local

exchange.

However, the Agency has, precisely because of this, ensured as part of the obligation of

access to, and use of, specific network facilities, that HT, must ensure the sharing of ducts at

those locations where it unbundled the local loop for the purpose of self-supply, that is, it

must ensure access through distribution channels to the street cabinet of the operator or some

other concentration point pursuant to Article 30 of the ECA and the Ordinance on the manner

and conditions of access to and sharing of electronic communications infrastructure and

associated facilities95

. Furthermore, if there is no room in the ducts, HT must lease dark fibre

to the operator. If there is no free dark fibre, HT should ensure access based on wavelength

(WWDM access) over fibre used by HT for self-supply in order to connect the beneficiary’s

active equipment to the network.

4.1.3.1.2 Service of unbundled access to the local loop based on FttH solution

Further to H1 Telekom’s comment that the service of unbundled access to the copper-based

local loop and the service of unbundled access to the local loop based on FttH solution are not

substitutable services, that is, that optics substitutes copper but not vice versa, the Agency

gives the following reply:

The Agency has, as it stated on page 25 of the document, used demand-side substitution to

establish substitute services for the currently valid service of wholesale (physical) network

infrastructure access (including shared or fully unbundled access) at a fixed location. In other

words, the Agency was looking for services that beneficiaries might use as substitute services

for the service of unbundled access to copper-based local loop, in the manner that users of this

service, if the incumbent increases the price thereof, build their own access infrastructure or

start using some other wholesale service, which will be regarded by them as an equivalent

service.

Consequently, the Agency used the existing wholesale serviced to establish the dimension of

the relevant market, that is, to extend the dimension of the relevant market depending on

whether the existing wholesale service may be substituted with individual wholesale services

or by rolling out own infrastructure.

Although the wholesale service of unbundled access to the local loop based on FttH solution

currently does not exist, and, taking into account the forward looking principle, the Agency

thinks that, in case of a hypothetical increase of the service of unbundled access to copper-

based local loop, and the start of migration of HT’s end users to services based on new

technical solutions, beneficiaries of this service would be interested in switching this services

with the service of unbundled access to the local loop based on FttH solution because this

service would allow them to provide more quality, faster and innovative services and thus

compete with HT at the retail level.

95

OG 154/2008



138

On the other hand, according to H1 Telekom, beneficiaries who would be using the service of

unbundled access to the local loop based on FttH solution would not switch to copper-based

services because of a hypothetical price increase. Therefore, the Agency corrects its incorrect

conclusion that the service of unbundled access to the local loop based on FttH solution and

the service of unbundled access to the copper-based local loop are substitute services by

saying that the service of unbundled access to the local loop based on FttH solution is a

substitute service for the service of unbundled access to the copper-based local loop.

Furthermore, further to the Agency’s conclusion that the service of unbundled access to the

local loop over optical fibre may not be regarded as a substitute service for the service of

unbundled access to copper-based local loop, H1 Telekom stresses that his may be regarded

as correct if the beginning and end of the copper and optical pairs are in the same place. In

that case, the beneficiary has the same status as HT, otherwise, this is not the case.

The Agency thinks that broadband Internet access services over optical fibre will have s

significant influence on competition at the retail level, that is, these services will be

substitutable with the existing services based on ADSL technology because this will satisfy

the need of users for more quality, faster and innovative services. This is because access

networks are being modernised and the existing twisted copper pair is, partially or fully,

replaced by optical fibre in the way that it is being shortened or completely disappears. This

does not mean that the possibility of access disappears in such cases, including the obligation

of access to the end user but only that access is provided over a different technology.

Considering the principle of technological neutrality and the fact that access to the end user is

no longer provided over copper but over optical fibre, it is clear that access over optical fibre

is a substitute service for the service of unbundled access to the local loop over copper.

Therefore, the Agency has conducted the analysis of the market in question, in accordance

with EU recommendations, on the basis of the principle of technological neutrality meaning

that the access to the end user, in case of replacement of twisted copper pair with optical fibre,

remains the same, or, in other words, the end user will still have the service which will be

provided over a new access infrastructure. It may be concluded from all of the above that, due

to technological changes, that is, technological development, and taking into account the

principle of technological neutrality, the Agency includes all physical access infrastructure

providing access to the end user without limiting itself to the twisted copper pair, that is, the

Agency considers the service of unbundled access to the local loop over optical fibre as a

substitute service of the service of unbundled access to the local loop over copper .

4.1.3.2. Bitstream service as a substitute service of the service of unbundled access to the

local loop

H1 Telekom asked what is that an additional burden on the local pair which changes the price

access speed, and states that the pair is identical for all speeds, including the DSLAM

connection, while transferred traffic is charged separately.

First of all, the Agency described in the above-mentioned Article only the currently valid

wholesale broadband Internet access service, which consists of ADSL transport and ADSL

access services. ADSL access speed may be identical or different from HT (depending on the

operator’s decision), but it may never exceed the maximum speed provided by HT within its

retail service of ADSL access.



139

Furthermore, the Agency stresses that a single bitstream access service was proposed as part

of regulatory obligations and that HT must offer a single price that will contain both speed

and traffic/data transfer which implies that with more access speed user will use more

capacity in the core network. Furthermore, since the wholesale price of bitstream access

service will be based on the retail minus method and taking into account the fact that HT

charges a higher price for greater access speed to its end users as well, it may be concluded

that the wholesale price for bitstream access service will differ according to different access

speed.

4.1.3.4. Broadband Internet access service for self-supply as a substitute service for the

service of unbundled access to the local loop

H1 Telekom agrees with the Agency’s claim on page 36 of this document that operators, in

order to keep end users in case of a hypothetical price increase, will not increase the price of

the service for the end user to cover the difference in the price of wholesale service, however,

it stresses that operators will not be able to further develop their service and broaden their

offer.

The Agency agrees with H1 Telekom’s opinion that the operator will be prevented from

further developing the service and broadening the offer. However, in this part the Agency

wanted to establish whether operators providing the service for the purpose of self-supply

could create a sort of competitive pressure on HT to prevent HT from increasing the price of

the service of unbundled access to the local loop. The Agency concluded that there is no such

competitive pressure from operators using their own infrastructure.

On one hand, operators using the service of unbundled access to the local loop will not

modify the price charged to end users because of the wholesale price increase in order to keep

those users, but this will place them, according to H1 Telekom, into an unfavourable position.

On the other hand, the Agency thinks that if operators using the service of unbundled access

to the local loop modify the price charged to end users because of the wholesale price

increase, those end users will mostly switch this service with the service provided by HT

since HT may provide the same service to each of these users.

Therefore, the Agency concludes that only network infrastructure access over copper pair

provided by HT for self-supply may be included into the dimension of services and not

service provided by other operators via their own infrastructure. .

Additionally, since H1 Telekom pointed out in the comments on the wholesale broadband

access market that other types of access provided by HT for self-supply to the end user must

be included96

, not only those based on copper pair, the Agency shall take this comment into

account on this market as well.

The Agency agrees that other types of network infrastructure access provided by Ht for self-

supply also need to be taken into account but only those types of access which may be

included into the relevant market dimension. Therefore, the service of network infrastructure

access on the basis of FttCab concept provided by HT for self-supply and the service of

network infrastructure access on the basis of FttH concept provided by HT for self-supply

both need to be taken into account. Although HT did not deliver in questionnaires prepared

96

p. 139 of the document „Analysis of Wholesale Broadband Access Market“



140

for the purpose of analysis of this relevant market information that it provides these types of

access to network infrastructure to the end user, the Agency thinks that in this case, as in the

case of wholesale service, the forward looking principle has to be taken into account to

include the above-mentioned types of broadband access provided by HT for self-supply.

Therefore this document needs to be amended accordingly.

6.4.2.1. Discriminatory use or withholding of information

H1 Telekom asked the following question: „how to behave when HT opens a new point of

access at a location of the beneficiary and thus significantly decreases the potential of the

beneficiary’s location and “steals” a significant number of users. The Agency imposed on HT, in accordance with Article 61, paragraph 3, item 3 of the ECA,

the obligation not to withdraw the already granted access to the local loop because the

withdrawal of the already granted access might cause damage and increase of costs of

operators who were using the service of unbundled access to the local loop and to leveraging

of HT’s significant market power to a downstream retail market.

The Agency also obliged HT to provide information on planned changes in the network so

that operators using the service of unbundled access to the local loop might be able to timely

react and adjust to the occurred changes. Therefore, the Agency proposed that HT be

mandated to notify operators of planned network changes at least one year before starting the

implementation of the changes in question The modernisation plans for the access network of

the infrastructure operator such as: the opening of new access nodes, rerouting of parts of the

network to a new access note etc. must be carried out in such a manner that the existing

services provided by operators to their end users are never threatened, that is, the principles of

spectrum compatibility in the access network must always be respected

In case of a complete termination of the existing access network and switching to a new NGA

network, the Agency thinks that the already granted access must be ensured or a

corresponding substitute access in order to preserve the continuity in the provision of services

by the operator and the possibility of the operator to compete on the market and in the NGA

context, that is, regardless of the changes in the existing network infrastructure and access

technologies towards the end user, except if operators agree upon a certain form of migration.

In case of lack of agreement between operators, HT must notify the operators and the Agency

at least five years in advance the intention to completely remove the existing network so that

they could have enough time to plan alternative access to the end user. The Agency has

amended the text of this document accordingly, and imposed on HT the obligation in

question.

7.1.1. Obligation of access to, and use of, specific network facilities

The Agency stated in the document that: „ The location where the operator will install the

street cabinet must comply with technical requirements, and the equipment to be installed in

the mentioned cabinet must completely ensure network integrity, that is, it may not cause the

degradation of services provided from the local exchange.“ In relation to this sentence, H1

Telekom states that the same should apply to HT, that is, that HT should not distort network

integrity when installing a street cabinet.



141

The Agency agrees with the above-mentioned comment that HT must, when installing a street

cabinet or any other intervention on the network, preserve network integrity, and the Agency

will incorporate this into the text of the analysis. Furthermore, further to the Agency’s claims that, pursuant to Article 61, paragraph 3, item 3

of the ECA, the Agency finds it necessary to impose on HT the obligation not to withdraw the

already granted access to the local loop, H1 stresses that this is an important obligation in

situations where there already is another operator at some location and Ht is increasing the

number of access points related to this location. The Agency stresses that the purpose of the-above mentioned obligation was precisely to

prevent HT from withdrawing the already granted access considering the investments already

made by the operator.

7.1.3. Obligation of transparency H1 Telekom proposes that HT must specify conditions, time limits and prices of the service of

unbundled access to the fibre-based local loop by means of point-to-point link in the

reference offer for unbundled access to the local loop and related facilities within 90 days

from the completion of market analysis, and not from the receipt of a reasonable request for

the service of unbundled access to copper-based local sub-loop specify conditions, time limits

and prices of the service of unbundled access to the local sub-loop in the reference offer for

unbundled access to the local loop and related facilities. H1 Telekom asks who will decide

whether a certain request is reasonable. In this part, the Agency replies to H1 Telekom’s comments related to the reasonable request.

The Agency stated in its document that SMP operators must assess whether a request is

reasonable in accordance with the proposed obligation of non-discrimination and technical

characteristics of its own network.

This means that, in this case, HT will have to assess whether a request is reasonable or not. If

HT decides that a request is not reasonable, the Agency will, upon the operator’s request, and

in accordance with Article 20 of ECA, decide whether the request is reasonable.

Furthermore, the Agency finds it unjustified to impose on HT the obligation to offer terms

and conditions, deadlines and wholesale prices for certain services before there is a reasonable

request from other operators. This might put HT in an unfavourable position to prepare

wholesale conditions, which incurs additional costs, although there is a possibility that no

operator is interested in the service in question.

Therefore, the Agency will not change its proposal that HT must, within 90 days from the

receipt of a reasonable request, specify conditions, time limits and prices of the service of

unbundled access to the fibre-based local loop by means of a point-to-point link in the

reference offer for unbundled access to the local loop and related facilities...

Concerning H1 Telekom’s comment concerning the meaning of related facilities in the name

of the reference offer for unbundled access to the local loop and related facilities, the Agency

replies that related facilities are defined in the Ordinance on reference offers – facilities

related to the provision of unbundled access to the local loop, in particular, collocation,

electronic communication lines and adequate IT systems access to which must be allowed to



142

the beneficiary to provide services on a competitive and equal basis. Since HT must take into

account the provisions of the Ordinance on reference offers when preparing the reference

offer, HT must define the meaning of the related facilities in the reference offer for unbundled

access to the local loop and related facilities. Furthermore, concerning H1 Telekom’s comment that Static Plan must be made publicly

available to all operators, the Agency stresses that precisely the paragraph in relation to which

H1 requests the publication of the Static Plan reads: “The Agency finds it necessary to impose

on HT the obligation to define the Static Plan for Frequency Spectrum Management with the

accompanying Pairs Management Plan in HT’s access network in the reference offer for

unbundled access to the local loop and related facilities.” Consequently, the Static Plan for

Frequency Spectrum Management with the accompanying Pairs Management Plan in HT’s

access network will make a constituent part of the reference offer for unbundled access to the

local loop and related facilities and, as such, it will be publicly available to all operators. Considering H1 Telekom’s comment that it must be made possible that all works related to

the realisation of collocation premises are carried out by the operator and his contractor under

HT’s supervision, the Agency stresses that it proposed this obligation to HT and refers to

Chapter 7.1.1. Obligation of access to, and use of, specific network facilities where t reads:„

For all works on the realisation of collocation premises (installation of cables) for which HT

uses external contractors, HT must allow the operator to choose the contractor (HT’s

contractor or some other contractor) on the basis of its own business decisions. If the

operator employs its own contractors, an HT’s employee will supervise the works.

7.1.4. Price control and cost accounting obligation

Concerning H1 Telekom’s comment that Agency should be imposed an approximate date for

the completion of the project for the definition of cost accounting method (cost model), the

Agency stresses that its obligations related to the electronic communications sector, in

accordance with Article 5, paragraph 1 of the ECA, have been defined in the ECA, and that

the mentioned Article does not prescribe the obligation for the Agency to define the deadline

for the completion of the project in question. However, the Agency stresses that the start of

the project is planned for the last quarter of 2009, and the planned time limit for the

preparation of models and for their application amounts to 18 months since the start of the

project.

a) Fully unbundled access to the copper-based local loop

H1 Telekom stresses that a strong growth trend in the number of unbundled local loops is a

result of the beginning of new entries into this market, and not of a competitive price. H1

Telekom also stated that it was easy to get funds for the investments, which is no longer the

case and the price should, therefore, be modified. In reply to the Agency’s claims that the

Agency’s goal is not to lower the price in question in order not to have a negative impact, that

is, discourage the investments of operators into infrastructure, H1 Telekom stresses that the

price in question should not stimulate the operator to use the ULL service but to build its own

infrastructure, which requires time and funds and does not ensure a reasonable time for the

recovery of funds.



143

The Agency will not change its view that the existing price of the service in question should

not be changed until the implementation of a cost oriented price and that a significant growth

in the number of unbundled local loops since the introduction of the service clearly shows that

the price is acceptable. The Agency also, once again, stresses that the price in question is

almost the lowest compared to other countries of the European Union. Therefore, as the

Agency already stated, while the relations between retail and wholesale prices remain as they

are, the Agency thinks that the price of the service of fully unbundled access to the local loop

should not be changed until the implementation of a cost-oriented price in accordance with

regulatory obligations imposed in this Chapter. The Agency thinks that problems related to

the service of unbundled access to the local loop may not be solved by lowering the prices but

by solving other problems related to this service, which was also proposed by the Agency

under regulatory obligations (i.e. allowing operators to choose their own contractors for the

realisation of collocation premises, undisturbed access by means of won intermediary cable

between the MDF and the IDF, the altered malfunction repair procedure, a shortened time

limit for the recovery of the surplus of funds paid for the preparation of collocation premises

and putting them at disposal, the increase of penalties in case of delayed delivery of an

individual local loop, a transparent presentation of all relevant performance indicators by HT

for all operators, the opening the possibility of sub-loop unbundling).

8.2.4 Answers to comments made by OT-Optima Telekom

Optima gave joint comments referring to the analysis of the market of wholesale (physical)


and the market of wholesale broadband access. For that reason, these comments have been

incorporated in both documents concerning the relevant markets in question, except for the

parts which are explicitly related to a certain market.

Optima stresses that regulatory obligations are imposed depending on the situation on

individual relevant markets and that they should not be focused only on the regulation of an

individual market but of the market in general. In that sense, all the obligations should be

balanced for the purpose of achieving the objectives of market regulation.

Before imposing regulatory obligations, the Agency must identify competition problems in

the relevant market by identifying the existing competition problems and envisaging which

problems might occur if the Agency did not regulate the market on which it established the

existence of operators with significant market power. The Agency must also ensure the

imposition only of those regulatory obligations which are necessary to deal with the identified

market problems, which is exactly what the Agency has done. In conclusion, it is not clear

what Optima finds arguable in relation to the imposition of regulatory obligations since the

Agency, on the basis of the principles of proportionality and justification, imposed those

regulatory obligations that will resolve the existing problems as well as problems which might

occur considering the current situation on the market and, each in its own way, slow down

and completely stop further development of the electronic communications market in the

Republic of Croatia.

Therefore, as it is obvious from the text of the analysis, the mentioning of possible

competition problems did not result in the imposition of all possible regulatory obligations,

which leads to the conclusion that the Agency took into account the actual situation in the

relevant market of the Republic of Croatia and imposed the regulatory obligations on the basis



144

of the identified problems and in accordance with the legal basis or, more precisely, with

Article 56, paragraph 3 of the ECA.

As a result, the Agency thinks that all of Optima’s claims are unfounded and refers Optima to

Chapter 6.4 of this document where everything is explained in detail.

Furthermore, Optima states that (quote): „We think that, after having adopted conclusions on

every individual market, HAKOM should have made an analysis of all regulatory obligations

and specify which part and which concrete measures are aimed at encouraging investments,

and which part and which measures it deems justified to protect investments made by each

operator, including HT, and which measures are aimed at stimulating competition.“ As it was

already mentioned, the Agency imposed regulatory obligations pursuant to legal obligations.

Taking this into account, the Agency does not see any purpose or meaning in Optima’s

requests. First, since the Agency, while carrying out market analysis pursuant to Article 52,

paragraph 4 of the ECA, has to take into account the relevant European Commission

Guidelines on market analysis and assessment of significant market power and the current

situation on the domestic electronic communications market, which the Agency did, it is

questionable whether Optima’s comments are legally founded. Moreover, they are unfounded

because the Agency conducted a detailed and comprehensive analysis as provided for by the

ECA, that is, it analysed the markets of wholesale (physical) network infrastructure access

and wholesale broadband access. In this market analysis procedure, the Agency took into

account the further dynamics of market development.

4. Definition of the relevant market

Optima states that the Agency incorrectly understands the meaning of potential competition.

On page 12 of this document the Agency explains the difference between potential

competition and supply-side substitution. Optima stresses that there must be a difference on

the market between a potential rival and an active operator, but that the regulation of this

difference should not be based on the fact that existing operators are not facing additional

costs, which are faced by potential operators.

Since the Agency, while carrying out market analysis pursuant to Article 52, paragraph 4 of

ECA, has to take into account the relevant European Commission Guidelines on market

analysis and assessment of significant market power, the Agency took over the explanation of

the difference between potential competition and supply-side substitution from Article 2.2.

„Main criteria for the definition of relevant markets” European Commission Guidelines.

In addition to the above-mentioned, the Agency wishes to point out that Optima clearly

misunderstood supply-side substitution since it links supply-side substitution with the active

operator on the market. The Agency has never linked supply-side substitution with operators

active in the market but it tried to establish whether competitors exert such pressure that in

case of a hypothetical price increase in relation to which substitutability is established, this

service or an equivalent service may be provided by someone else without additional

significant costs. Supply-side substitution means that there is a possibility that an operator

could provide an equivalent service in the period covered by the analysis with no additional

significant costs.

4.1.1. Retail market of broadband Internet access



145

Optima stresses that microwave antennae which are sometimes used to access certain users

were not the subject of the analysis. Optima thinks that effects that might be even

hypothetically caused by new technologies which are being used, although rarely, should be

analysed because their importance could increase in the upcoming three years.

The Agency agrees with Optima’s opinion that it is necessary to consider the impact of

technologies which are currently not so widespread but might have a significant influence in

the time period covered by the analysis. The Agency did not take into account the access over

microwave antennae because no operator explicitly stated in the questionnaire that it used

microwave links to provide access to end users. Therefore, the Agency did not consider this

type of access in its analysis. However, the Agency will follow the development of this

service and its influence on the broadband Internet access market and, if necessary, it will

conduct a new market analysis even before the expiry of three years.

4.1.2.4. Access over cable

Concerning access over cable, Optima pointed out that operators must use HT’s wholesale

service to be able to offer service over twisted copper pair, and they have interest in using it

because HT is the only one whose infrastructure covers the entire territory of the Republic of

Croatia. On the other hand, cable operators, although due to their recent investments into their

network they have entered the market of voice services, are not even close to cover the entire

territory of the Republic of Croatia. Furthermore, since the Agency established the national

territory as the geographical dimension of the relevant market, Optima thinks that the

potential and possibility for operators to use the infrastructure of other operators, as well as

the possibility of cable operators to offer their services, may be observed only at the national

level.

First of all, it must be emphasised that the Agency concluded on the basis of price and

functionality that access over cable represents a substitute service for ADSL access over

twisted copper pair at retail level but not at the wholesale level, as it is concluded by Optima

in its comments.

In Section 4.1.3.4 of the Agency’s document Service of broadband Internet access for self-

supply as a substitute service for unbundled access to the local loop, the Agency stressed that

it thinks that operators providing broadband Internet access service for the purpose of self

supply cannot influence the setting of prices of unbundled access to the local loop service at

the retail level by means of competitive pressure. In other words, there is no such competitive

pressure that would prevent the incumbent from increasing the price of the service in question

between 5 and 10% without regulation of the service of unbundled access to the local loop,

because operators do not have the option to switch to the service provided by some other

operator

Also, in Section 4.1.4 Supply-side substitution, the Agency gives its opinion that in case of a

hypothetical increase in the price of the service of unbundled access to the local loop no

operator will be able to, in the period covered by the analysis, replicate HT’s network

infrastructure in order to provide the service of unbundled access to the local loop due to high

costs of building own infrastructure the majority of which cannot be recovered.

In conclusion, the Agency thinks that it sufficiently emphasised that there is no demand-side

substitution because operators do not have the option to switch to another operator’s services



146

or supply-side substitution because no operator will be able to, in the period covered by the

analysis, replicate HT’s network infrastructure and provide the equivalent service of

unbundled access to the local loop, not even cable operators.


Optima stresses that the Agency’s conclusion on the substitutability between shared and full

access to unbundled local loop is not completely accurate because the Agency did not

consider all aspects of the problem. Optima states that (quote):“ in the first place, if an

operator uses full access it uses it to offer to its end user both internet access and voice

service. In case of a hypothetical price increase, an operator switching to shared access

cannot provide to its user the service equivalent to or serving to satisfy the equivalent need.“

Furthermore, Optima stresses that the Agency did not take into account its own conclusion

that investments into access over local loop are the biggest of all investments and that former

investments into access to the local loop should be taken into account as well as the impact of

the increase in the price of full access to return on these investments. It also stresses that

market analysis did not give the number of operators who are actually using the service of

shared access compared to full access to be able to discuss the substitutability of services.

The Agency stresses that the number of operators using shared access as opposed those using

full access is not of crucial importance when establishing the substitutability of services but

the question is whether operators may, in case of a hypothetical price increase of the service

of fully unbundled access to the local loop, switch to the service of shared access to the local

loop without significant costs. According to the Agency’s opinion, the relationship between

the price and investments into shared access determines whether mentioned services are

substituted services. Also, shared access allows the operator to provide VoIP of equivalent

quality to public voice service, which means that an operator may over shared access offer to

the end user services equivalent to those offered over full access.

4.1.3.1.1. Service of unbundled access to the local loop based on FttCab solution

Optima stresses that the Agency’s claims that (quote):”Considering the limitations of existing

copper pairs, it is impossible to add some DSL-technology to all pairs in a cable because in

that case mutual harmful influences (so-called crosstalk) between pairs in a cable would be

too big and would additionally limit the range and quality of transmission. Furthermore, due

to saturation, all uses do not get the same quality of broadband Internet access service and IP

television, and some copper pairs do not even support the above-mentioned services“ are

potentially dangerous because they can serve as a justification for limitations in the usage of

pairs.

The Agency stressed in the above-mentioned chapter that operators’ investments into access

infrastructure may be expected in the upcoming period in order to satisfy the needs of uses,

that is, in order to offer a wide spectrum of services such as the transmission of multichannel

HDTV (eng. High Definition Television), video on demand and videoconferences, and the

service of voice over the Internet protocol (VoIP). The Agency’s opinion is that ADSL2plus

technology will become inefficient in the upcoming years because of demands of users and

the introduction of VDSL2 transfer technology into the access network will become

necessary. If VDSL2 transfer technology is not introduced, than evolution scenarios of access

networks will be based on ADSL2plus access technology which means that the concept of

opening of new access nodes will have to be applied instead of the concept of local sub-loop



147

unbundling. This concept in an unbundled environment forces beneficiaries who have their

own collocation at the existing location of the local exchange to arrange collocation premises

at a new location as well and install the necessary equipment or to cede their users to the SMP

operator.

On the contrary, in the evolution scenario of sub-loop unbundling, the beneficiary may still

provide services to its users without collocating its equipment at a distant location. Clearly, in

this case the beneficiary may not offer transfer speed equivalent to that provided by the

operator from a distant location. In this concept, beneficiaries still have at their disposal a

complete area of the access network which they had at the moment of adopting a business

decision to realise their collocation at this location but transfer speed they may provide

compared to the operator that collocated the equipment at a distant location is several times

slower.

Therefore, the Agency thinks that future evolution scenarios of broadband access networks

based on a symmetrical pair must be based on the concept of sub-loop unbundling with

VDSL2 transfer technology.

Furthermore, Optima stresses that the quality of service is not influenced only by crosstalk but

the distance of the user also may influence the lower quality of the connection, in particular in

case of ADSL service.

The Agency completely agrees that access speed depends on other factors besides crosstalk

and length of the local loop, such as: line impendance, medium signal strength and line coding

technique. Interferences in transmission over twisted copper pairs also need to be taken into

account as well as many other problems which are negligible in the transmission via POTS

channels, such as, for example, signal muffling and restrictions on the transmission range, the

existence of bridged passes and loading coils, and impendance mismatches. However, it must

be stressed that crosstalk is the dominant facto influencing the performances of DSL

transmission systems.

Furthermore, Optima stresses that, since in some cases and to some extent the above-

mentioned problems may be resolved, or at least mitigated, these as a rule are not the main

reasons for an operator’s decision to invest, and operators will invest only if they expect better

margins on their services, faster and greater availability of users and more control over

services. The existence of technical problems should be the constituent part of SLA of all

HT’s wholesale services. HT does not guarantee the quality of its services but it obvious that

the quality of its wholesale services directly influences the quality of services of other

operators, and, if HT does not intend to invest into its won infrastructure, it should bear part

of responsibility for the service provided to beneficiaries.

The Agency stresses that, as part of the obligation of access to, and use of, specific network

facilities, it proposed the imposition of the obligation to ensure the basic level of service –

SLA (Service Level Agreements) on HT, among other things, the compliance with certain

deadlines in the provision of the service of unbundled access to the local loop and related

facilities, which has been described in detail on page 66 of this document. Furthermore, the

Agency defined the time limits for delivery and penalties in case of delay on page 71 of this

document in relation to obligations proposed for HT. Some of the penalties were also

increased in order to motivate HT to deal with problems in the adequate and most efficient

way. In order to ensure the application of the imposed basic level of SLA, the Agency



148

proposed that HT be imposed the obligation to publish performance indicators on a quarterly

basis or upon the Agency’s request, which has been described in detail in the part on the

obligation of transparency..

Furthermore, Optima insists that the Agency based its conclusion about the modernisation of

telecommunications infrastructure by shortening the length of the twisted copper pair in order

to increase the quality of services on the behaviour of European operators and that such

projections may be allowed in a market analysis provided that further Agency’s decisions are

not be based on such projections, including the conclusion that services that would be

provided on the basis of FttCab solution may be regarded as substitute services for the service

of unbundled access to the local loop. Optima thinks that the Agency completely forgets that

such an investment, including the time when to start and how to proceed, will be decided

upon by one operator who currently manages the majority of infrastructure, and that the

investment cycle itself (course and duration) depend on this operator’s decisions. Such a

decision still has not been adopted, and, it must be borne in mind that, when adopted, it will

directly influence the behaviour of operators using the wholesale service of unbundled access

to the local loop because every intervention into the shortening of the local loop includes an

investment for beneficiary operators. Besides, Optima claims that the Agency does not

analyse whether such an investment cycle could even be started in the current economic

situation, let alone completed and whether it will have certain effects on the market in the

upcoming three-year period. All these conclusions may and probably do have bearing on the

Agency’s position that the price for the lease of a pair is adequate and that it should not be

changed. It is therefore important that the Agency analyses with equal attention and the same

level of detail all assumptions on which it bases its decisions later on.

In relation to the above-mentioned comments, the Agency insists that in its documents it only

stated facts relating to European practice concerning investments of incumbents into their

access infrastructure by shortening the length of the copper pair to the end user (FttCab) in

order to be able to provide the service of broadband Internet access and related facilities over

VDSL technologies to end users who need greater access speed. In the current situation, the

Agency may not influence the decisions of operators to invest into their access infrastructure,

including by using FttCab concept to provide the service of broadband Internet access and

related facilities over VDSL technologies to end users who need greater access speed.

The Agency’s objective is to encourage investments and modernisation of the access network.

Another objective is to ensure that other operators are able to continue providing services on

the basis of the existing wholesale services, at least in the period covered by this analysis, and

to provide to those operators new wholesale services based on FttCab or FttH solution in

order for them to be able to compete with the SMP operator in the provision of broadband

Internet access and convergent services. Therefore, the regulatory obligations proposed by the

Agency area aimed at preventing HT from withdrawing the already granted access and at

forcing it to offer wholesale services equivalent to those used by its own retail arm to provide

broadband Internet access and convergent services.

Furthermore, the Agency’s position that the amount of the monthly fee for the service of

unbundled access to the copper-based local loop does not need to be changed is based on the

significant growth in the number of unbundled local loops since the introduction of the

service, which means that the price is acceptable. The Agency also stresses once again that the

price in question is almost the lowest compared to European Union states. Therefore, as the

Agency already pointed out, while the relationship between retail and wholesale prices



149

remains as it is, the Agency feels that the price of the service of fully unbundled access to the

local loop need not be changed until the application of a cost oriented price in accordance

with regulatory obligations imposed in this chapter. The Agency thinks that problems related

to the service of unbundled access to the local loop may not be resolve by lowering the prices

but by solving other problems related to the service in question, which was proposed by the

Agency under regulatory obligations (i.e. allowing operators to choose their own contractors

for the realisation of collocation space, undisturbed access by means of won intermediary

cable between the MDF and the IDF, the altered malfunction repair procedure, a shortened

time limit for the recovery of the surplus of funds paid for the preparation of collocation space

and putting it at disposal, the increase of penalties in case of delayed delivery of an individual

local loop, a transparent presentation of all relevant performance indicators by HT for all

operators, the opening the possibility of sub-loop unbundling).

7.1.2. and 7.1.3. Obligation of transparency and the obligation of non-discrimination

Optima argues that the obligation of transparency and the obligation of non-discrimination

will be fully achievable only when operators will have equal treatment in terms of use of

telecommunications distribution channels, which is closely related to regulating access to

telecommunications infrastructure. All operators do not have a regulated status for using

distribution channels in the equivalent manner and under the equivalent conditions because of

which everyone has their own problems. Considering the new regulation envisaged by the

ECA and the introduced changes, Optima thinks that the Agency should resolve the

problem/status of distribution channels before the final imposition of all regulatory

obligations.

The Agency has fulfilled all obligations related to the rules of sharing of electronic

communications infrastructure and associated facilities (which includes the resolution of the

problem/status of distribution channels). The most important of the Agency’s obligations

were to adopt the Ordinance on the manner and conditions of access to, and sharing of

electronic communications infrastructure and associated facilities (OG 154/08) and the

Ordinance on the certificate and fee for the right of way (OG 31/09).

Therefore, the Agency thinks that there are no disputes over telecommunications channels,

but it agrees that the implementation of new provisions of ECA is necessary. As a result, the

Agency is planning to organise workshops for the presentation and explanation of the

provisions and rules concerning sharing and rights related to “right of way”.

The Agency once again explains the provisions of the ECA, which clearly prescribe that

infrastructure operators must allow to beneficiaries, with a fee and on the basis of a concluded

contract, access to, and sharing of, electronic communications infrastructure and associated

facilities. Requests of beneficiaries must be processed in the order in which they were

received. After having adopted the above-mentioned ordinances the Agency’s involvement in

dispute resolution became rarer and the number of complaints to the Agency was reduced to

the minimum. Since Optima states that it knows the examples of discriminatory behaviour of

infrastructure operators, that is, that there are differences in the use of distribution channels by

beneficiaries, it is necessary to deliver to the Agency the mentioned data that may help to

conclude that certain measures must be applied under the Agency’s competence against

everyone acting or behaving in a prohibited way.



150

In relation to security instruments, Optima points out that they were justified in the market

opening process, but today they only represent the strengthening of the already strong HT’s

negotiating position. It also stressed that HT and all other SMP operators are in a more

favourable situation than other participants in the market because they have a basis to ask for

security instruments while other operators may secure their claims only during negotiations.

The Agency stresses that HT’s RIO for the service of unbundled access to the local loop

currently reads:„If the Beneficiary has, for a period of one year from the conclusion of the

Contract on Access to the Local Loop, regularly paid all of its payment obligations for

services provided by T-Com on the basis of the Contract, the obligation to submit a certain

security instrument shall no longer apply to the Beneficiary after the expiry of that time

period.“ The Agency deems it justified to agree upon a certain security instrument when

concluding a contract on wholesale service in accordance with the provisions of the

Ordinance on reference offers. After the expiry of one year, if the operator has paid all bills on

time, the operator may be exempt from the obligation to keep delivering security instruments

because such a treatment might result in inequality between operators.

7.1.6. Other regulatory obligations

Optima’s claim about the unfoundedness of the Agency’s conclusion concerning the

imposition of a regulatory obligation/measure that would regulate the undue use of

information is completely incorrect. Optima’s position that a legal provision, more precisely,

Article 66, paragraph 5 of the ECA, is not valid, that is, it does not represent a sufficient basis

for the treatment of data collected during negotiations/arranging access and interconnection is

contrary to basic legal principles. The question is, then, what does Optima regard as a

“stronger” legal means of regulation than the law and bylaws. The provision in question is

coercive and non-compliance implies misdemeanour i.e. it is regarded as a serious violation of

ECA which is punishable by a fine from HRK 100,000.00 to HRK 1,000,000.00 for a legal

person and 20,000.00 to 100,000.00 for the responsible person in the legal person.

8.2.5 The Agency’s comments

The Agency wishes to amend the condition mentioned under the obligation of access,

referring to HT’s obligation to, upon the operator’s request, within 4 months install control

meters for measuring actual power consumption by the operator for all existing collocation

premises by adding that this obligation must include a special control meter for energy and

that prices must be based on actual costs. .

The Agency also thinks that the beneficiary must be allowed to choose its own supplier of

control meters on the basis of it’s won business decisions, including the contractor to install

the meters in the main distribution cabinet in collocation premises. HT must be informed

thereof on time. This amendment is in accordance with the already propose amendments

relating to the possibility for operators to install air-conditioning in collocation premises by

themselves, to user external contractors for the realisation of collocation premises or to be

allowed access by means of their won intermediary cable between the MDF and the IDF. In

this way the Agency is trying to avoid the charging of additional costs to other operators, that

is, behaviour described in Chapter 6.4.2.3 of this document on undue requirements and ensure

the increase of competitiveness at the retail market. The Agency finds this obligation

necessary to prevent the leveraging of HT’s significant market power onto the downstream

retail market because this allows new operators to choose between different options and thus

influence their own costs. It also prevents the linking of the service of installing and



151

procurement of control meters with HT’s exclusive right to procure, deliver and install them.

Although the existing reference offer defined the manner of payment of electricity

consumption, the Agency finds it necessary to transparently show in obligations that HT must

charge the consumed power at a price it pays to its own electricity distributor.

The Agency has, by mistake, failed to specify in the document which was subject to public

consultation that HT must submit to the Agency contracts concluded on the basis of the

reference offer for unbundled access to the local loop and related facilities within 15 days

from their conclusion, which was proposed as part of the obligation of non-discrimination to

SMP operators in other documents of market analysis which where subject to a public

consultation97

. This is necessary so that the Agency might verify whether the SMP operator is

complying with the obligation of non-discrimination. In case of non-compliance with the

mentioned obligation, and on the basis of the concluded contract, the Agency would be able to

react on time. Consequently, since the Agency sees no reason not to impose the mentioned

obligation on the SMP operator on this market, and taking into account the fact that no

participant in the public consultation commented on the obligation in question on other

relevant markets, the Agency shall amend the document accordingly, as part of the obligation

of non-discrimination.

Furthermore, considering HT’s comment on the market of call origination from public

communication networks provided at a fixed location (quote): “When calculating

interconnection prices the Agency used the exchange rate of Kuna against the Euro

amounting to HRK 7.1748, as an average of the mean exchange rate of the Croatian National

Bank in the period between July and December 2008. HT states that this exchange rate is no

longer applicable and does not reflect the current situation and proposes to the Agency to

apply the exchange rate which is current at the moment of adoption of this analysis, and since

the Agency used this exchange rate to determine the price of shared unbundled access to the

local loop, the Agency finds it necessary to comment on this comment in a document.

The Agency thinks that the Croatian National Bank’s exchange rate should be applied because

this is a competent institution for determining the level of the exchange rate. Furthermore, due

to exchange rate fluctuations during calculations of reference values into kunas, an average

exchane rate of the Croatian National Bank should be applied and the Agency thinks that it is

necessary to cover the last six months. This was also Vipnet’s proposal which the Agency

received in an administrative procedure for previous amendments of Vipnet’s reference offer

(Class: 344-01/07-01/488). In other words, the Agency thinks that the period of last six

months is a period which gives a relevant image on exchange rate fluctuations.

However, taking into account sudden changes in exchange rates caused by the world

economic crisis, the Agency finds it justified to allow both HT and the Agency to adjust the

price of the service of shared unbundled access to the local loop to the new average exchange

rate of kunas against the euro if the average exchange rate for Kuna against the Euro,

according to data from the Croatian National Bank, changes by more 10% compared to the

exchange rate used by the Agency to calculate the price of the service of shared unbundled

access to the local loop for every year.

97

Except in the document on analysis of wholesale (phyiscal) network infrastructure access at a fixed location

where this will be added as well..



152

Accordingly, if the average exchange rate of Kuna against the euro increases by 10% at least,

HT may charge prices of the service of unbundled access to the shared access to the local loop

that adjusted to a new exchange rate of Kuna against the Euro.

In other words, if in a period of one year after the entry into force of this analysis the average

CNB’s exchange rate for the last six month amounts to the minimum of HRK 7.8923 Kuna

for 1 Euro, HT will be forced to change the price of the service of shared unbundled access to

the local loop, calculated on the basis of the methodology from Chapter 7.1.4 of this

document on the basis of a new exchange rate. More precisely, if the above-mentioned

happened in a period of one year after the entry into force of this analysis, the average price of

the service of shared unbundled access to the local lop would no be calculated at the exchange

rate of . HRK 7.1748 for 1 Euro and amount to HRK 21.46, but it would be calculated at the

exchange rate of HRK 7,8923 for 1 Euro and amount to HRK 23.60.

On the other hand, if the average exchange rate for Kuna against the Euro fell by at least 10%,

the Agency will be able to implement a new price for the service of unbundled access to the

local loo, which will correspond to a new exchange rate of Kuna against the Euro.

More precisely, if in the period of one year after the entry into force of this analysis at a

certain point in time the average mean CNB’s rate for the last six months falls by at least 10%

(1€=6.4573 HRK ), compared to the exchange rate applied by the Agency in this analysis

(1€=7.1748 HRK), the Agency will be able to turn the price for the service of shared

unbundled access to the local loop calculated on the basis of a method described in Chapter

7.1.4 of this document into the amount in kunas on the basis of the new exchange rate. More

precisely, if this happens in a period of one year from the entry into force of this analysis, the

average price for the service of shared unbundled access to the local loop would not be

calculated at the exchange rate of HRK 7.1748 for 1 euro and amount to HRK 21.46, but at

the exchange rate of HRK 6.4573 for 1 euro and amount to HRK 19.30.

MARKET ANALYSIS OF WHOLESALE (PHYSICAL) NETWORK INFRASTRUCTURE

Documents

Transcript of MARKET ANALYSIS OF WHOLESALE (PHYSICAL) NETWORK INFRASTRUCTURE