A statement issued by the Czech regulator, the CTU, on January 19, 2017 requires mobile network operators (MNOs) to lower the wholesale rates at which they are offering LTE to MVNOs. If operators do not comply, the regulator threatens to revoke the relevant spectrum licenses. The CTU's statement gives mobile virtual network operators (MVNOs) a powerful weapon when negotiating access; however, the regulator needs to address its worryingly contradictory view of the market.
The CTU has had inconsistent views on the market for MVNO access throughout the years
Formally, the CTU's request for MNOs to lower wholesale LTE rates is not a regulatory decision on prices; however, it is likely to have the practical effect on regulating rates because it gives MVNOs a powerful tool to negotiate access. The regulator has recommended a rate between CZK0.10 and CZK0.15 ($0.004 to $0.006) per MB for mobile LTE data, and a rate of CZK0.01 ($0.0004) per MB for fixed LTE. It has also disclosed that the current rate offered by O2 is CZK0.43 ($0.017) per MB and Vodafone's rates range between CZK0.29 ($0.011) and CZK0.51 ($0.02) per MB. If the operators do not comply within a month from the date of the CTU's statement, the regulator has threatened to initiate the process to withdraw the spectrum licenses that were assigned to those MNOs in 2013.
Although one of the conditions attached to these spectrum licenses required MNOs to grant access to MVNOs, it did not set a price control and only required MNOs to set rates that allow MVNOs to "operate profitably." The CTU is clearly committed to protecting MVNOs and ensuring the obligations attached to spectrum licenses are respected; however, it appears to have inconsistent views about the market for mobile call access and origination. In March 2016, the regulator's analysis found that the market does not require ex-ante regulation, because, regardless of the obligation on MNOs, MVNOs in the market were benefitting from access on the basis of commercial agreements. In 2006, the first review left the market unregulated; in 2012, the regulator was minded to impose ex-ante remedies to facilitate MVNOs' access requests, only to note that market dynamics changed quickly afterward.
Despite the differences between MNOs and MVNOs in terms of size and objectives in the market, it is clear that MVNOs need access to 4G technology to market attractive offers; the huge popularity of smartphones, and the increased expectations of customers, make 4G a necessity for every operator offering mobile internet. To this end, the CTU's effort to protect MVNOs and ensure they can offer 4G is sensible. Nonetheless, the regulator should look to develop a more certain and stable view of the market, avoiding the U-turns it appears to have taken throughout the years, which could end up damaging stakeholders on all sides.
Regulating access for MVNOs, TE0007-000912 (June 2015)
MVNO: A Market in Transition, TE0009-001525 (August 2016)
Luca Schiavoni, Senior Analyst, Regulation