Regulation

As the national regulator of the electronic communications market, the Agency is responsible for ex-ante regulation. It has this responsibility based on the EU regulatory framework, which comprises 5 directives, and the Electronic Communications Acts (ZEKom), which transposes these directives and the directive on competition in the national legislation.

Ex-ante regulation is a form of setting the rules of operation in advance. Usually this regulatory approach is applied to market segments marked by natural monopoly, where companies may hinder potential competitors from entering the market with their economic dominance. In electronic communications this usually means former national (incumbent) telecommunication operators. To prevent such companies (also labeled as operators with significant market power – OSMP) from potentially abusing their market power, the regulator has the right to issue a decision imposing on them suitable measures or regulatory obligations. The purpose of regulatory obligations is to prescribe to the OSMP how it should act in relationship with other operators, and above all that it must provide certain capacities (e.g. network elements, collocations, ducts, aerial towers...) to all interested operators at certain prices. Companies that were not recognized as operators with significant market power do not have these obligations and their operations in the market are free.

The regulatory procedure has three steps. If a certain relevant market is already excluded from the European regulatory framework, the Agency must conduct a three criteria test. If the test reveals that the relevant market is still subject to ex-ante regulation, or that it is included in the current regulatory framework, the procedure continues with an analysis of the market. In the analysis the Agency defines the relevant market (relevant markets are designated by the European Commission with a special Recommendation, based on which the Agency defines them in the General Act), analyzes the market situation, and examines whether any of the companies holds a dominant position in the market. If it establishes that one of the companies holds a dominant position, it plans appropriate measures for limiting such an operator’s power and preventing the abuse of this power. When conducting the analysis, the Agency collaborates with the Competition Protection Office, which gives its opinion about the analysis.

The next step comprises a public discussion, in which everyone can take part. The Agency publishes the analysis on its website, and the interested public has 30 days to provide comments or propose changes (it is not bound by the Agency’s proposals). The Agency also consults with the European Commission and other European regulators. They may comment on the analysis and the measures, while the European Commission even has the right to veto: if it disagrees with the definition of the relevant market, with labeling an operator as an OSMP, or with the proposed measures, it may call upon the Agency to change or repeat the analysis.

The third step comprises an administrative procedure, in which the Agency designates the operator with significant market power (OSMP) and imposes on it obligations as proposed in the analysis. These measures are prescribed in the law and comprise the obligation of equal treatment (Article 24) obligation of transparency (Article 23), obligation of access to network (Article 26), the obligation of price control (Article 27), and the obligation of separating accounting records (Article 25). The strictest measure envisaged by ZEKom is functional separation (Articles 27a and 27b), which means that the OSMP must perform a part of its activities in a separate and independent business unit.
 

If an OSMP disagrees with the Agency’s decision, it may file a lawsuit in an administrative dispute against the decision. The decision on the lawsuit is made by the Administrative Court.

It should be stressed that ex-ante regulation is primarily aimed at the wholesale segment of the telecommunications market. If the wholesale market is operating properly, the advantages of the competition are reflected in better quality and cheaper retail services, and in competitors’ focus on innovative solutions that ensure the development of the market in the future. This is also the main benefit that such regulation brings to end-users.