31 March 2003

Richard Eccles

The Commission gave notice of its intention to grant favourable treatment under Article 81 EC for 3G network sharing agreements between T-Mobile and MMO2 that they are building in Germany and in the UK. The Commission’s analysis focuses on the anticipated benefits and significant cost savings from the shared infrastructure, leading to quicker 3G Network roll-outs than otherwise would be the case, and accordingly the possibility of services competition using the shared infrastructure at an earlier point in time than would otherwise be the case. The infrastructure sharing is also expected to result in greater network coverage and reduce environmental problems.

It is important to note that in both Germany and the UK, the parties have agreed to share sites and to provide each other with national roaming facilities, but the agreements do not relate to 3G downstream services to be provided to customers with respect to which the parties remain independent of each other. The Commission has also reserved its position on the sharing of the radio access network, which is also provided for in the agreements, until the parties to decide whether or not to proceed with this aspect of their cooperation.

In the German case, further restrictions on sales by the parties of capacity to MVNOs were included and were approved by the Commission: each party had the general right to resell the roaming capacity of the other party to resellers and service providers except that the resale of circuit-switched voice capacity to MVNOs was subject to the other party’s approval. Likewise the sale of roaming capacity to other licensed network operators or to MVNOs providing essentially mobile voice services, was subject to the other party’s consent. Further as regards data traffic, the parties have the right to make national roaming capacities of the other party available to MVNOs, provided that these MVNOs did not use this capacity for the provision of services to end-customers that would be essentially identical to an end-to-end mobile service from a customer’s viewpoint. The latter requirement aims to prevent voice over internet protocol provision based on roaming access charged at data rates, which would undercut the parties in retail markets.

Essentially, the factors underlying the Commission’s position are the following: first, any restriction of infrastructure competition will be more than offset by increased services competition as a result of faster network roll-outs; second, there will be reduced environmental impact as a result of less infrastructure needing to be deployed; third, the agreements are not exclusive and generally allow third party site sharing and national roaming (subject to limited exceptions); fourth, safeguards have been put in place to limit the exchange of sensitive information between the parties.

By contrast, one can envisage, certain forms of infrastructure sharing which would not so readily meet with the Commission’s or national competition authorities’ approval. Where infrastructure sharing involved the sharing of spectrum capacity and/or of the parties’ base stations, this could involve an unacceptable restriction of competition and of choice to consumers, reducing overall investment in mobile network operations, particularly if such sharing were contemplated for more than a limited transitional period. Any infrastructure arrangement which involved geographic division of the market through different operators developing networks in distinct areas and allowing the customers on to its network, would be unlikely to be granted approval under the EC or relevant national competition rules. Further, the joint operation by two separate operators of infrastructure elements, for example though cost and revenue sharing arrangements, or the appointment of a joint venture company to operate the networks on their behalf, would probably run contrary to the competition rules, at least in so far as they would involve collusion on prices, which would be likely under such arrangements.

In essence, whilst some basic infrastructure sharing arrangements not involving any restriction in services competition may be acceptable under the EC competition rules, arrangements involving capacity sharing or joint provision of mobile services are much less likely to be given favourable treatment.