Competition Safeguards in the Telecommunications Sector Jordan’s case Presented to the

1. Competition Safeguards in the Telecommunications Sector Jordan’s case Presented to the ITU/BDT Arab Regional workshop on “Developing Competition Polices and Strategies in Telecommunications” Rabat (Morocco)19, -21 December 2005 By Muwaffaq Abu Aqola Commissioner Telecommunication Regulatory Commission Jordan

2. OUTLINE • Objectives • Background • Legal References for competition safeguards in the Telecommunications Sector • The competition Law • The Telecommunications Law • License Agreements • On going activities related to Competition Safeguards in the Telecommunications Sector • Instructions of Competition Safeguards in the Telecommunications Sector • MOU between TRC and the Competition Directorate • Learned Lessons

3. Objectives • To Share with the attendees TRC’s experiences in promoting and safeguarding competition in the Telecommunications Sector and on going activities in this regards • To shed light on the draft Instructions on competition Safeguards in the Telecom sector and a draft MOU to be signed between the TRC and the CD, including its purposes and structures. • learned lessons.

4. Background 1 • Jordan has a population of approximately 5.5 million people. • Per Capita income is US$ 2200. • The Ministry of Information and Communications Technology (MoICT) has the responsibility for defining the general policy for the sector. The TRC has the responsibility for implementing the sector policy. • The Competition directorate at the ministry of Industry and Trade has the responsibility for promoting and safeguarding competition in Jordan. The TRC has the responsibilities for promoting and safeguarding competition in the telecom sector. • Jordan is a member of the WTO as of April 2000 and undertakes the obligations of the reference paper in the GATS schedules, including obligations on competitive Safeguards.

5. Background 2 • Full liberalisation of the sector commenced at the beginning of 2005 • A new Licensing regime commenced at the beginning of 2005 whereby the TRC started to issue only two types of Licenses (Individual License and Class License) instead of license per service. • No of licences as of the end Nov. 2005 • 29 Class licenses • 6 non class Licenses (Individual) - 3 mobile, 2 fixed, 1 Radio Trunking • 17 license applications understudy (3 individual and 14 class) • Penetration rates as of the end of June 2005: • Fixed 11.8 % • Mobile 37.3% • Internet 2.6%

6. Legal References for Competition in the Telecommunications Sector • The competition Law No 33 of 2004 • The Telecommunications Law No.13 of 1995 and its amendments • License Agreements • Instructions on Competition Safeguard in the Telecommunications Sector – final draft

7. Legal References for Competition in the Telecommunications SectorThe competition Law • Established the Competition Directorate (CD) and defined its tasks • Assigned to the CD the overall responsibility for enforcing the competition law. • Established a competition committee and defined its members and responsibilities, among which drawing the competition policy for Jordan. • Defined dominance, cases of abuse of dominance , anti competitive practices and economic concentrations. • prohibited collusions, abuse of dominance and anticompetitive conducts • Regulated economic concentration and defined process for approval. • Defined penalties for any violations to the law • Assigned to the court the jurisdiction to hear cases related to the violations of the law related to abuse of dominance, anti competitive practices, collusions, and allowed to the CD, the regulators, consumers associations and others to institute, through the public prosecutors, complaints.

8. Legal References for Competition in the Telecommunications SectorThe Telecommunications Law Assigned to the TRC: • To draw up plans that encourage investment in the telecommunications and information technology sectors in the Kingdom, on a competitive basis. • To stimulate competition in the ICT, relying on market forces, • to forbid anti-competitive behavior or practices; • to forbid actions by any person to abuse a dominant position in the sector, and • to take all necessary actions in this regard

9. Legal References for Competition in the Telecommunications SectorLicense Agreements • All license agreements include a schedule entitled “Anti competitive activities” to regulate anti competitive activities. • The license: • Obliges each licensee to cooperate with other licensees in order to facilitate the provision of public telecommunications services,” • States that the licensee will not, alone or together with others, engage in any anti-competitive practices, in particular the following anti-competitive practices: • anti-competitive cross-subsidization; • abuse of its dominant position, if any; • enter into any exclusive arrangements with third parties for the location of its facilities that are acquired to provide its licensed activities; • enter into any agreements, arrangements or undertakings with any Person, including any supplier of services that compete with its licensed activities that have as their objective or effect the fixing of prices or any other restraint on competition; • any anti-competitive tied or linked sales practices, provided that the Licensee may bundle services so long as the bundled services are also available separately; • use information obtained from competitors if the object or effect of such use is anti-competitive

10. Ongoing Activities related to Competition Safeguards in the Telecom Sector • Instructions on Competition Safeguards in the Telecommunications Sector. • MOU between the TRC and the Competition Directorate

11. Instructions on Competition Safeguards in the Telecommunications Sector Introduction • Will replace the schedule in the license agreements related to anti competitive activities. • Will establish the processes and definitions to be used by the TRC in analyzing cases alleging anticompetitive behavior by the licensees. • Public Consultation Document published on July14, 2005 • Comments received on September 11, 2005. • Comments on comments received on September 26, 2005. • Comments discussed with the industry between 2-3 Oct, 2005 • Instructions to be issued, with an explanatory memo, by Jan 2006.

12. Instructions on Competition Safeguards in the Telecommunications Sector Structure • Defines relevant markets • Determines definition and measurements of market share • Defines measures to designate dominant licenses • Defines anti competitive conducts • Defines process for the review of Acquisition or Transfer of Interests in Licenses for Anti-Competitive Effect

13. Instructions on Competition Safeguards in the Telecommunications Sector Market Definitions • Four product markets, as a starting point: • Fixed public telecommunications network and services • Mobile public telecommunications network and services • Leased lines • Interconnection • TRC may consider other market in the future

14. Instructions on Competition Safeguards in the Telecommunications Sector Market Share • Measured, initially, by the share of revenue in the defined market. • TRC may consider other appropriate measures of market share.

15. Instructions on Competition Safeguards in the Telecommunications Sector Designation of Dominant Licensees 1 • A dominant licensee in a relevant market is defined as a licenses that has a sufficient impact on the market that it can control and affect the activity of the relevant market. • A Licensee with a market share of 50% or more of a relevant market is presumed to be dominant in that market. The presumption of dominance can be overcome by consideration of evidence establishing that the Licensee does not have the ability to control and affectthe activity of the market> • A Licensee with a market share of at least 25% in a relevant market but less than 50% of that market is subject to classification as dominant in that market if consideration of evidence establishes that the Licensee has the ability to control and affect the activity of the market. • A Licensee with a market share of less than 25% in a relevant market is presumed to be non-dominant in that market. The presumption of non-dominance can be overcome by consideration of evidence establishing that the Licensee has the ability to control and affect the activity of the market

16. Instructions on Competition Safeguards in the Telecommunications SectorDesignation of Dominant Licensees 2 • The presumption of dominance/non dominance can be overcome by consideration of any of the following factors: • Licensee size, as compared to the size of other competitors in the market, • Its control of essential facilities, that competitors rely upon • Its conduct in the market with respect to competitors and customers, including end users, • Its technological advantages or disadvantages with respect to competitors • Countervailing power, if any, of competitors and customers, including end users, • Access to capital markets/financial resources compared to such access by competitors, • Bundling of products or services and the effect of such bundling on competition in the market, • Economies of scale and/or scope, including relationships with affiliated Licensees, • Vertical integration, including relationships with affiliated licensees, • Characteristics of its distribution network, • Absence or presence of competitors and potential competition in the market, • Barriers to expansion in the market, and • Barriers to entry in the market.

17. Instructions on Competition Safeguards in the Telecommunications Sector Anti Competitive conducts • Forms of anti-competitive conducts : • Abuses of dominant position • Collusion

18. Instructions on Competition Safeguards in the Telecommunications Sector Abuses of Dominance Predatory Pricing Anti-Competitive Cross-Subsidization Anti-Competitive Price Discrimination Margin Squeeze Excessively Long-Term Contracts Anti-Competitive Bundling and/or Tying Anti-Competitive Exclusionary Practices Anti-Competitive Exclusive Dealing

19. Instructions on Competition Safeguards in the Telecommunications SectorCollusion • Collusion” is defined as the coordinated actions of two or more Licensees, who would normally be competitors, to exert influence on the market with the objective or effect of fixing prices or otherwise restraining competition. • explicit collusion” cartel” exist where two or more independent Licensees explicitly agree to act in combination, conspiracy, cooperation or concert to pursue a common strategy, • tacit collusion,” exist where competitors have not explicitly or formally agreed to act in concert but consciously behave in parallel ways. • Price fixing agreements” are agreements between competitors (horizontal) or agreements between wholesale and retail providers (vertical) that directly or indirectly fix prices. • Horizontal price fixingagreements is presumed to constitute collusion. • vertical price fixing agreements reviewed on a case-by-case basis to determine if such agreements are anti-competitive.

20. Draft MOU between the TRC and the Competition Directorate 1 • Draft MOU prepared by the TRC and sent to the CD on July 21, 2005 • Comments received on Oct. 2, 2005. • Comments discussed between the two parties on Oct. 20, 2005. • The MOU to be signed by Jan 2006. • THE MOU • Aims at coordinating the relationship between the TRC and the Competition Directorate, Facilitate Coordination, avoid duplication of procedures and decisions in the sector, prevent any variation of decisions, ensure the progress of performance and improve the economic efficiency through exchange of information and knowledge between the two entities. • Establish general framework for cooperation and coordination between the two entities and a steering committee to follow up the implementation of the MoU

21. Draft MOU between the TRC and the Competition Directorate 2 The terms of the draft MOU oblige each party to • Provide the other party with any legal, technical or economic assistance and support regarding any complaints or applications submitted to it related to competition in the telecom sector • Cooperate in conducting investigation • Notify the other party to make its representations upon receipt of any complaint or claim related to competition. The other party shall inform the first party with its preliminary representation regarding the complaint or the claim within a period not exceeding 2 weeks as from the date of notification • Inform the other party with its preliminary decision regarding the complaint , in order to afford an opportunity to the other party to make its representations prior to the issuance of the decision by the Examining Party, • The Examining Party, to provide the other party with a copy of its studies made on the complaint, and a copy of the decision made in this regard. • Both parties to forbear to perform any procedures until the other party makes its representations. • Consult with each other before performing any functions, in case that both parties receipt, at the same time, a complaint or claim related to competition in the telecom sector • Entitles the TRC to request from the CD to carry out any of the powers granted to it by the Competition Law, • .

22. Competition Safeguard Instruction Process to review • Review of Acquisition or Transfer of Interests in Licenses and Licensees : • All changes of Control of the Licensee shall require the prior written approval of the TRC. All assignments or transfers of a License shall require the prior written approval of the TRC. • If a Person seeks to acquire, directly or indirectly, an interest in or Control of a License such that it shall hold a total of at least 10% ownership or Control of a Licensee, measured by ownership of voting securities or value of equity ownership, or Control of the affected Licensee, the parties to the transaction shall be required to file jointly a notification of the transaction with the TRC prior to the transaction’s consummation. 3.Following the filing of such a notification, the TRC shall inform the parties within 30 days of the initial filing whether the TRC shall subject the transaction to further review

23. Learned Lessons • Competition is Vital for the development of the telecom sector. Jordan's experience proved this vitalness. • The Regulator has a significant and prominent role to play to promote and to safeguards competition. • The availability of proper regulations to safeguards competition is crucial. The regulator capacity to properly enforce these regulations is equally crucial. • Cooperation between the regulator and the competition bureau, if any, is a must. An MOU between the two entities is necessary to avoid duplications of efforts and to ensure proper cooperation and utilization of resources.

24. Thank Youmuwaffaq.abu-aqola@trc.gov.jo