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Telefonica bites back against fine
Thursday 05 July 2007 16:46:17 by John Hunt

Following a €152 million fine imposed by the European Commission yesterday, Telefonica has spoken out in defence stating it will dispute the decision before the European Courts. The announcement the European Commission made on 4th July states:

"The European Commission has fined the Spanish incumbent telecoms operator Telefónica €151 875 000 for a very serious abuse of its dominant position in the Spanish broadband market. Telefónica imposed unfair prices in the form of a margin squeeze between the wholesale prices it charged to competitors and the retail prices it charged to its own customers. In so doing, Telefónica weakened its competitors, making their continued presence and growth difficult: competitors were forced to make losses if they wanted to match Telefónica's retail prices. With high wholesale costs and weakened retail competition on the broadband market, Spanish consumers pay 20% more than the EU-15 average for broadband access. The Spanish broadband penetration rate is 20% below EU-15 average, and its growth is nearly 30% below that of the EU-15.

European Commission Announcement

Telefonica claims that it has fully complied with regulation by the Spanish Cimisión del Mercado (CMT) and finds itself squeezed in between the CMT and the European Commission, which it believes are at odds with each other.

The Commission however believes that Telefonica was only regulated based on forecasts it provided to the CMT, setting maximum prices ex ante (i.e. based on those forecasts), and Telefonica would have soon been aware that these did not match its actual data. This lead to a margin squeeze which it could have ended at any time by lowering its wholesale prices.

The full European Commission announcement is available here, and Telefonica's Press Release, here (PDF).

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