On 1 February 2016, the Body of European Regulators for Electronic Communications (BEREC) issued its opinion concurring with the European Commission that a proposal by the German Telecom Regulator (BNetzA) to use an LRAIC+ model to set  wholesale fixed voice termination rates raised serious concerns.

BNetzA proposed to set the actual level of fixed termination rates for 19 operators with significant market power at a uniform tariff of 0.24 EURct/min (peak and off-peak), using the LRAIC+ methodology.

This is the seventh case concerning BNetzA’s proposals for regulating fixed termination rates on a basis other than that in the Commission’s Recommendation, which recommends a bottom up LRIC approach. Regulatory Authorities can deviate from the Commission’s Recommendation but have to provide the reasons for such a position. BEREC again concurred with the Commission that BNetzA had not provided sufficient justification why national circumstances in Germany justify the deviation and why its approach would be better suited than a BU-LRIC model.

BEREC concurs with the serious doubts raised by the Commission that the alternative pricing model would ensure that customers derive maximum benefits in terms of efficient cost based termination rates.

BEREC also concurs that the LRAIC+ model appears to create barriers to the internal market. The approach proposed by BNetzA results in a level of termination rates which are significantly higher than those in other Member States, a price difference incurred at the expense of operators, and consumers, in other Member States from where calls originate.

In making its case, the European Commission refers to academic studies, which lead to an expectation that  termination rates based on a pure BU-LRIC methodology can result in significant consumer welfare gains without a reduction in operators’ profits or an appreciable negative impact on investment.

Background image created by Creativeart – Freepik.com