8.11.2012

Official Journal of the European Union

C 340/5

EFTA SURVEILLANCE AUTHORITY RECOMMENDATION

of 13 April 2011

on the regulatory treatment of fixed and mobile termination rates in the EFTA States (1)

2012/C 340/04

THE EFTA SURVEILLANCE AUTHORITY (2),

Having regard to the Agreement on the European Economic Area (3),

Having regard to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice, and in particular Article 5(2)(b) thereof,

Having regard to the Act referred to at point 5cl of Annex XI to the EEA Agreement, Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (‘Framework Directive’) (4), and in particular Article 19(1) thereof, as adapted to the EEA Agreement by Protocol 1 thereto,

After consulting the EFTA Communications Committee,

Whereas:

(1)

According to Article 8(3) of the Framework Directive, National Regulatory Authorities (NRAs) shall contribute to the development of the internal market, inter alia, by cooperating with each other and with the European Commission and/or the Authority, where appropriate, in a transparent manner to ensure the development of consistent regulatory practice. However, during the assessment of more than 850 draft measures notified under Article 7 of the Framework Directive it appeared that inconsistencies in the regulation of voice call termination rates still exist.

(2)

Although some form of cost orientation is generally provided for in most EEA States, a divergence between price control measures prevails across the EEA. In addition to a significant variety in the chosen costing tools, there are also different practices in implementing those tools. This widens the spread between wholesale termination rates applied across the EEA, which can only be partly explained by national specificities. The European Regulators Group (ERG) established by the Act referred to at point 5ci of Annex XI to the EEA Agreement (Commission Decision 2002/627/EC (5)), as adapted to the EEA Agreement by Protocol 1 thereto (6), recognised this in its Common Position on symmetry of fixed call termination rates and symmetry of mobile call termination rates. NRAs have also, in a number of cases, authorised higher termination rates for smaller fixed or mobile operators on the grounds that these operators are new entrants into the market and have not benefited from economies of scale and/or are subject to differing cost conditions. These asymmetries exist both within and across national boundaries, although they are slowly decreasing. The ERG recognised in its Common Position that termination rates should normally be symmetric and asymmetry requires an adequate justification.

(3)

Significant divergences in the regulatory treatment of fixed and mobile termination rates create fundamental competitive distortions. Termination markets represent a situation of two-way access where both interconnecting operators are presumed to benefit from the arrangement but, as these operators are also in competition with each other for subscribers, termination rates can have important strategic and competitive implications. Where termination rates are set above efficient costs, this creates substantial transfers between fixed and mobile markets and consumers. In addition, in markets where operators have asymmetric market shares, this can result in significant payments from smaller to larger competitors. Furthermore, the absolute level of mobile termination rates remains high in a number of EEA States compared to those applied in a number of countries outside of the EEA, and also compared to fixed termination rates generally, thus continuing to translate into high, albeit decreasing, prices for end-consumers. High termination rates tend to lead to high retail prices for originating calls and correspondingly lower usage rates, thus decreasing consumer welfare.

(4)

The lack of harmonisation in the application of cost-accounting principles to termination markets to-date demonstrates a need for a common approach which will provide greater legal certainty and the right incentives for potential investors, and reduce the regulatory burden on existing operators that are currently active in several EEA States. The objective of coherent regulation in termination markets is clear and recognised by the NRAs and has been repeatedly expressed by the European Commission and the Authority in the context of their assessment of draft measures under Article 7 of the Framework Directive.

(5)

Certain provisions of the regulatory framework for electronic communications networks and services require necessary and appropriate cost-accounting mechanisms and price control obligations to be implemented, namely Articles 9, 11 and 13 in conjunction with recital 20 of the Act referred to at point 5cj of Annex XI to the EEA Agreement (Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (‘Access Directive’) (7)), as adapted to the EEA Agreement by Protocol 1 thereto (8).

(6)

The Act referred to at point 26j of Annex XI to the EEA Agreement (Commission Recommendation 2005/698/EC of 19 September 2005 on accounting separation and cost-accounting systems under the regulatory framework for electronic communications (9)), as adapted to the EEA Agreement by Protocol 1 thereto (10) has provided a framework for the consistent application of the specific provisions concerning cost-accounting and accounting separation, with a view to improving the transparency of regulatory accounting systems, methodologies, auditing and reporting processes to the benefit of all parties involved.

(7)

Wholesale voice call termination is the service required in order to terminate calls to called locations (in fixed networks) or subscribers (in mobile networks). The charging system in the EEA is based on Calling Party Network Pays, which means that the termination charge is set by the called network and paid by the calling network. The called party is not billed for this service and generally has no incentive to respond to the termination price set by its network provider. In this context, excessive pricing is the main competition concern of regulatory authorities. High termination prices are ultimately recovered through higher call charges for end-users. Taking into account the two-way access nature of termination markets, further potential competition problems include cross-subsidisation between operators. These potential competition problems are common to both fixed and mobile termination markets. Therefore, in the light of the ability and incentives of terminating operators to raise prices substantially above cost, cost orientation is considered the most appropriate intervention to address this concern over the medium term. Recital 20 of the Access Directive notes that the method of cost recovery should be appropriate to the particular circumstances. In view of the specific characteristics of call termination markets and the associated competitive and distributional concerns, the European Commission and the Authority have for a long time recognised that setting a common approach based on an efficient cost standard and the application of symmetrical termination rates would promote efficiency, sustainable competition and maximise consumer benefits in terms of price and service offerings.

(8)

According to Article 8(1) of the Framework Directive, EEA States shall ensure that when carrying out the regulatory tasks specified in that Directive and the specific directives, in particular those designed to ensure effective competition, NRAs take the utmost account of the desirability of making regulations technologically neutral. Article 8(2) of the Framework Directive further requires NRAs to promote competition by, amongst other things, ensuring that all users derive maximum benefit in terms of choice, price and quality of service and that there is no distortion or restriction of competition. In order to achieve these objectives and a consistent application in all EEA States, the regulated termination rates should be brought down to the costs of an efficient operator as soon as possible.

(9)

In a competitive environment, operators would compete on the basis of current costs and would not be compensated for costs which have been incurred through inefficiencies. Historic cost figures therefore need to be adjusted into current cost figures to reflect the costs of an efficient operator employing modern technology.

(10)

Operators which are compensated for actual costs incurred for termination have few incentives to increase efficiency. The implementation of a bottom-up model is consistent with the concept of developing a network for an efficient operator whereby an economic/engineering model of an efficient network is constructed using current costs. It reflects the equipment quantity needed rather than that actually provided and it ignores legacy costs.

(11)

Given the fact that a bottom-up model is based largely on derived data, e.g. network costs are computed using information from equipment vendors, regulators may wish to reconcile the results of a bottom-up model with the results of a top-down model in order to produce as robust results as possible and to avoid large discrepancies in operating cost, capital cost and cost allocation between a hypothetical and a real operator. In order to identify and improve possible shortcomings of the bottom-up model, such as information asymmetry, the NRA may compare the results of the bottom-up modelling approach with those resulting from a corresponding top-down model which uses audited data.

(12)

The cost model should be based on the efficient technological choices available in the time frame considered by the model, to the extent that they can be identified. Hence, a bottom-up model built today could in principle assume that the core network for fixed networks is next-generation-network (NGN)-based. The bottom-up model for mobile networks should be based on a combination of 2G and 3G employed in the access part of the network, reflecting the anticipated situation, while the core part could be assumed to be NGN-based.

(13)

Taking account of the particular characteristics of call termination markets, the costs of termination services should be calculated on the basis of forward-looking long-run incremental costs (LRIC). In an LRIC model, all costs become variable, and since it is assumed that all assets are replaced in the long run, setting charges based on LRIC allows efficient recovery of costs. LRIC models include only those costs which are caused by the provision of a defined increment. An incremental cost approach which allocates only efficiently incurred costs that would not be sustained if the service included in the increment was no longer produced (i.e. avoidable costs) promotes efficient production and consumption and minimises potential competitive distortions. The further termination rates move away from incremental cost, the greater the competitive distortions between fixed and mobile markets and/or between operators with asymmetric market shares and traffic flows. Therefore, it is justified to apply a pure LRIC approach whereby the relevant increment is the wholesale call termination service and which includes only avoidable costs. An LRIC approach would also allow the recovery of all fixed and variable costs (as the fixed costs are assumed to become variable over the long run) which are incremental to the provision of the wholesale call termination service and would thereby facilitate efficient cost recovery.

(14)

Avoidable costs are the difference between the identified total long-run costs of an operator providing its full range of services and the identified total long-run costs of that operator providing its full range of services except for the wholesale call termination service supplied to third parties (i.e. stand-alone cost of an operator not offering termination to third parties). To ensure an appropriate attribution of the costs, a distinction needs to be made between those costs that are traffic-related, i.e. all those fixed and variable costs which rise with increased levels of traffic, and those costs that are non-traffic-related, i.e. all those costs which do not rise with increased levels of traffic. To identify the avoidable costs relevant for wholesale call termination, non-traffic-related costs should be disregarded. Then, it may be appropriate to attribute traffic-related costs firstly to other services (e.g. call origination, SMS, MMS, broadband, leased lines, etc.) with wholesale voice call termination being the final service to be taken into account. The cost allocated to the wholesale call termination service should thus be equal only to the additional cost incurred to provide the service. As a consequence, cost accounting based on an LRIC approach for wholesale call termination services in fixed and mobile markets should allow only the recovery of costs which would be avoided if a wholesale call termination service was no longer provided to third parties.

(15)

It can be seen that call termination is a service which generates benefits for both calling and called parties (if the receiver did not receive a benefit it would not accept the call), which in turn suggests that both parties have a part in the creation of costs. The use of cost causation principles to set cost-orientated prices would suggest that the creator of the costs should bear those costs. Recognising the two-sided nature of call termination markets with costs being driven by two sides, not all related costs need to be recovered via the regulated wholesale termination charge. However, for the purposes of this Recommendation, all of the avoidable costs of providing the wholesale call termination service can be recovered via the wholesale charge, i.e. all of those costs which increase in response to an increase in wholesale termination traffic.

(16)

In setting termination rates, any deviation from a single efficient cost level should be based on objective cost differences outside the control of operators. In fixed networks, no such objective cost differences outside the control of the operator have been identified. In mobile networks, uneven spectrum assignment may be considered an exogenous factor which results in per-unit-cost differences between mobile operators. Exogenous cost differences may arise where spectrum assignments have not taken place using market-based mechanisms but on the basis of a sequential licensing process. Where the spectrum assignment takes place through a market-based mechanism such as an auction or where there is a secondary market in place, frequency-induced cost differences become more endogenously determined and are likely to be significantly reduced or eliminated.

(17)

New entrants in mobile markets may also be subject to higher unit costs for a transitional period before having reached the minimum efficient scale. In such situations, NRAs may allow them, after having determined that there are impediments on the retail market to market entry and expansion, to recoup their higher incremental costs compared to those of a modelled operator for a transitional period of up to four years after market entry. Drawing upon the ERG Common Position, it is reasonable to envisage a time frame of four years for phasing out asymmetries based on the estimation that in the mobile market it can be expected to take three to four years after entry to reach a market share of between 15 and 20 %, thereby approaching the level of the minimum efficient scale. This is distinct to the situation for new entrants in fixed markets which have the opportunity to achieve low unit costs by focusing their networks on high-density routes in particular geographic areas and/or by renting relevant network inputs from the incumbents.

(18)

A depreciation method that reflects the economic value of an asset is the preferred approach. If, however, the development of a robust economic depreciation model is not feasible, other approaches are possible, including straight-line depreciation, annuities and tilted annuities. The criterion for choosing among the alternative approaches is how closely they are likely to approximate an economic measure of depreciation. Thus, if the development of a robust economic depreciation model is not feasible, the depreciation profile of each major asset in the bottom-up model should be examined separately, and the approach which generates a depreciation profile similar to that of economic depreciation should be chosen.

(19)	With regard to efficient scale, different considerations apply in fixed and in mobile markets. The minimum efficient scale may be reached at different levels in the fixed and mobile sectors as this depends on the different regulatory and commercial environments applicable to each.

(20)	When regulating wholesale termination charges, NRAs should neither preclude nor inhibit operators from moving to alternative arrangements for the exchange of terminating traffic in the future to the extent that these arrangements are consistent with a competitive market.

(21)

A period of transition until 31 December 2012 should be considered long enough to allow NRAs to put the cost model in place and for operators to adapt their business plans accordingly while, on the other hand, recognising the pressing need to ensure that consumers derive maximum benefits in terms of efficient cost-based termination rates.

(22)

For NRAs with limited resources, an additional transitional period may exceptionally be needed in order to prepare the recommended cost model. In such circumstances, if an NRA is able to demonstrate that a methodology (e.g. benchmarking) other than a bottom-up LRIC model based on current costs results in outcomes consistent with this Recommendation and generates efficient outcomes consistent with those in a competitive market, it could consider setting interim prices based on an alternative approach until 1 July 2014. Where it would be objectively disproportionate for those NRAs with limited resources to apply the recommended cost methodology after this date, such NRAs may continue to apply an alternative methodology up to the date for review of this Recommendation, unless the body established for cooperation among NRAs and the European Commission and the Authority, including its related working groups, provides sufficient practical support and guidance to overcome this limitation of resources and, in particular, the cost of implementing the recommended methodology. Any such outcome resulting from alternative methodologies should not exceed the average of the termination rates set by NRAs implementing the recommended cost methodology.

(23)	This Recommendation has been subject to consultation with the EFTA Communications Committee, which has given its opinion on it,

HEREBY RECOMMENDS:

When imposing price control and cost-accounting obligations in accordance with Article 13 of the Access Directive on the operators designated by National Regulatory Authorities (NRAs) as having significant market power on the markets for wholesale voice call termination on individual public telephone networks (‘fixed and mobile termination markets’) as a result of a market analysis carried out in accordance with Article 16 of the Framework Directive, NRAs should set termination rates based on the costs incurred by an efficient operator. This implies that they would also be symmetric. In doing so, NRAs should proceed in the way set out below.

2.	It is recommended that the evaluation of efficient costs is based on current cost and the use of a bottom-up modelling approach using long-run incremental costs (LRIC) as the relevant cost methodology.

3.	NRAs may compare the results of the bottom-up modelling approach with those of a top-down model which uses audited data with a view to verifying and improving the robustness of the results and may make adjustments accordingly.

The cost model should be based on efficient technologies available in the time frame considered by the model. Therefore, the core part of both fixed and mobile networks could in principle be next-generation-network (NGN)-based. The access part of mobile networks should also be based on a combination of 2G and 3G telephony.

The different cost categories referred to herein should be defined as follows:

(a)	‘incremental costs’ are those costs that can be avoided if a specific increment is no longer provided (also known as avoidable costs);

(b)	‘traffic-related costs’ are all those fixed and variable costs which rise with increased levels of traffic.

Within the LRIC model, the relevant increment should be defined as the wholesale voice call termination service provided to third parties. This implies that in evaluating the incremental costs NRAs should establish the difference between the total long-run cost of an operator providing its full range of services and the total long-run costs of this operator in the absence of the wholesale call termination service being provided to third parties. A distinction needs to be made between traffic-related costs and non-traffic-related costs, whereby the latter costs should be disregarded for the purpose of calculating wholesale termination rates. The recommended approach to identifying the relevant incremental cost would be to attribute traffic-related costs firstly to services other than wholesale voice call termination, with only the residual traffic-related costs being allocated to the wholesale voice call termination service. This implies that only those costs which would be avoided if a wholesale voice call termination service were no longer provided to third parties should be allocated to the regulated voice call termination services. Principles for calculating the wholesale voice call termination service increment in fixed and mobile termination networks respectively are further elaborated in the Annex.

7.	The recommended approach for asset depreciation is economic depreciation wherever feasible.

8.	When deciding on the appropriate efficient scale of the modelled operator, NRAs should take into account the principles for defining the appropriate efficient scale in fixed and mobile termination networks as set out in the Annex.

Any determination of efficient cost levels which deviates from the principles set out above should be justified by objective cost differences which are outside the control of the operators concerned. Such objective cost differences may emerge in mobile termination markets due to uneven spectrum assignments. To the extent that additional spectrum acquired to provide wholesale call termination is included in the cost model, NRAs should review any objective cost differences regularly, taking into account, inter alia, whether on a forward-looking basis additional spectrum is likely to be made available through market-based assignment processes which might erode any cost differences arising from existing assignments or whether this relative cost disadvantage decreases over time as the volumes of the later entrants increase.

10.

In cases where it can be demonstrated that a new mobile entrant operating below the minimum efficient scale incurs higher per-unit incremental costs than the modelled operator, after having determined that there are impediments on the retail market to market entry and expansion, the NRAs may allow these higher costs to be recouped during a transitional period via regulated termination rates. Any such period should not exceed four years after market entry.

11.

This Recommendation is without prejudice to previous regulatory decisions taken by NRAs in respect of the matters raised herein. Notwithstanding this, NRAs should ensure that termination rates are implemented at a cost-efficient, symmetric level by 31 December 2012, subject to any objective cost differences identified in accordance with points 9 and 10.

12.

In exceptional circumstances where an NRA is not in a position, in particular due to limited resources, to finalise the recommended cost model in a timely manner and where it is able to demonstrate that a methodology other than a bottom-up LRIC model based on current costs results in outcomes consistent with this Recommendation and generates efficient outcomes consistent with those in a competitive market, it could consider setting interim prices based on an alternative approach until 1 July 2014. Where it would be objectively disproportionate for those NRAs with limited resources to apply the recommended cost methodology after this date, such NRAs may continue to apply an alternative methodology up to the date for review of this Recommendation, unless the body established for cooperation among NRAs and the European Commission and the Authority, including its related working groups, provides sufficient practical support and guidance to overcome this limitation of resources and, in particular, the cost of implementing the recommended methodology. Any such outcome resulting from alternative methodologies should not exceed the average of the termination rates set by NRAs implementing the recommended cost methodology.

13.	This Recommendation will be reviewed in line with any future changes to the European Commission’s Recommendation 2009/396/EC on the Regulatory Treatment of Fixed and Mobile Termination Rates in the EU.

14.	This Recommendation is addressed to the EFTA States.

Done at Brussels, 13 April 2011.

For the EFTA Surveillance Authority

Sabine MONAUNI-TÖMÖRDY

Acting President

Sverrir Haukur GUNNLAUGSSON

College Member

(1) Corresponds to the European Commission’s Recommendation 2009/396/EC of 7 May 2009 on the regulatory treatment of fixed and mobile termination rates in the EU (OJ L 124, 20.5.2009, p. 67), as adapted to the EEA Agreement.

(2) Hereinafter referred to as ‘the Authority’.

(3) Hereinafter referred to as ‘the EEA Agreement’.

(4) OJ L 108, 24.4.2002, p. 33.

(5) OJ L 200, 30.7.2002, p. 38.

(6) Decision of the EEA Joint Committee No 10/2004 (OJ L 116, 22.4.2004, p. 58 and EEA Supplement No 20, 22.4.2004, p. 13), e.i.f. 7 February 2004.

(7) OJ L 108, 24.4.2002, p. 7.

(8) Decision of the EEA Joint Committee No 11/2004 (OJ L 116, 22.4.2004, p. 60 and EEA Supplement No 20, 22.4.2004, p. 14), e.i.f. 1 November 2004.

(9) OJ L 266, 11.10.2005, p. 64.

(10) Decision of the EEA Joint Committee No 84/2008 (OJ L 280, 23.10.2008, p. 18 and EEA Supplement No 64, 23.10.2008, p. 11), e.i.f. 5 July 2008.

ANNEX

Principles for the calculation of wholesale termination rates in fixed networks

The relevant incremental costs (i.e. avoidable costs) of the wholesale call termination service are the difference between the total long-run costs of an operator providing its full range of services and the total long-run costs of that operator not providing a wholesale call termination service to third parties.

A distinction needs to be made between traffic-related costs and non-traffic-related costs to ensure the appropriate attribution of those costs. The non-traffic-related costs should be disregarded for the purpose of calculating wholesale termination rates. From the traffic-related costs only those costs which would be avoided in the absence of a wholesale call termination service being provided should be allocated to the relevant termination increment. These avoidable costs may be calculated by allocating traffic-related costs first to services other than wholesale call termination (e.g. call origination, data services, IPTV, etc.) with only the residual traffic-related costs being allocated to the wholesale voice call termination service.

The default demarcation point between traffic- and non-traffic-related costs is typically where the first point of traffic concentration occurs. In a PSTN network this is normally deemed to be the upstream side of the line card in the (remote) concentrator. The broadband NGN equivalent is the line card in the DSLAM/MSAN (1). Where the DSLAM/MSAN is located in a street cabinet, then it needs to be considered whether the former loop between the cabinet and the exchange/MDF is a shared medium and should be treated as part of the traffic-sensitive cost category, in which case the traffic-/non-traffic-related demarcation point will be located in the street cabinet. If dedicated capacity is allocated to the voice call termination service irrespective of the technology deployed, then the demarcation point remains at the level of the (remote) concentrator.

To determine the efficient scale of an operator for the purposes of the cost model, NRAs should take into account that in fixed networks operators have the opportunity to build their networks in particular geographic areas and to focus on high-density routes and/or to rent relevant network inputs from the incumbents. When defining the single efficient scale for the modelled operator, NRAs should therefore take into account the need to promote efficient entry while also recognising that under certain conditions smaller operators can produce at low unit costs in smaller geographic areas. Furthermore, smaller operators that cannot match the largest operators’ scale advantages over broader geographic areas can be assumed to purchase wholesale inputs rather than self-provide termination services.

Principles for the calculation of wholesale termination rates in mobile networks

The relevant incremental costs (i.e. avoidable costs) of the wholesale call termination service are the difference between the total long-run costs of an operator providing its full range of services and the total long-run costs of an operator not providing a wholesale call termination service to third parties.

A distinction needs to be made between traffic-related costs and non-traffic-related costs to ensure the appropriate attribution of those costs. The non-traffic-related costs should be disregarded for the purpose of calculating wholesale termination rates. From the traffic-related costs only those costs which would be avoided in the absence of a wholesale call termination service being provided should be allocated to the relevant termination increment. These avoidable costs may be calculated by allocating traffic-related costs first to services other than wholesale call termination (e.g. call origination, SMS, MMS, etc.) with only the residual traffic-related costs being allocated to the wholesale voice call termination service.

The costs of the handset and the SIM card are not traffic-related and should be excluded from any costing model for wholesale voice call termination services.

Coverage can be best described as the capability or option to make a single call from any point in the network at a point in time, and capacity represents the additional network costs which are necessary to carry increasing levels of traffic. The need to provide such coverage to subscribers will cause non-traffic-related costs to be incurred which should not be attributed to the wholesale call termination increment. Investments in mature mobile markets are more driven by capacity increases and by the development of new services and this should be reflected in the cost model. The incremental cost of wholesale voice call termination services should therefore exclude coverage costs but should include additional capacity costs to the extent that they are caused by the provision of wholesale voice call termination services.

The costs of spectrum usage (the authorisation to retain and use spectrum frequencies) incurred in providing retail services to network subscribers are initially driven by the number of subscribers and thus are not traffic-driven and should not be calculated as part of the wholesale call termination service increment. The costs of acquiring additional spectrum to increase capacity (above the minimum necessary to provide retail services to subscribers) for the purposes of carrying additional traffic resulting from the provision of a wholesale voice call termination service should be included on the basis of forward-looking opportunity costs, where possible.

Following the approach outlined above, examples of costs which would be included in the termination service increment would include additional network capacity needed to transport additional wholesale traffic (e.g. additional network infrastructure to the extent that it is driven by the need to increase capacity for the purposes of carrying the additional wholesale traffic). Such network-related costs could include additional mobile switching centres (MSCs) or backbone infrastructure directly required to carry the terminating traffic for third parties. Furthermore, where certain network elements are shared for the purposes of supplying origination and termination services, such as cell sites or base transceiver stations (BTS), these network elements will be included in the termination cost model to the extent that they are needed because of the additional capacity necessary to carry terminating traffic by third parties. In addition, the additional spectrum costs and wholesale commercial costs directly related to the provision of the wholesale termination service to third parties would also be taken into account. This implies that coverage costs, unavoidable business overhead costs and retail commercial costs are not included.

To determine the minimum efficient scale for the purposes of the cost model, and taking account of market share developments in a number of EEA States, the recommended approach is to set that scale at 20 % market share. It may be expected that mobile operators, having entered the market, would strive to maximise efficiency and revenues and thus be in a position to achieve a minimum market share of 20 %. In cases where an NRA can prove that the market conditions in the territory of that EFTA State would imply a different minimum efficient scale, it could deviate from the recommended approach.

(1) Digital subscriber line access multiplexer/multi-service access node.

8.11.2012

Official Journal of the European Union

C 340/13

Notice of initiation of an anti-subsidy proceeding concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in the People's Republic of China

2012/C 340/06

The European Commission (‘the Commission’) has received a complaint pursuant to Article 10 of Council Regulation (EC) No 597/2009 of 11 June 2009 on protection against subsidised imports from countries not members of the European Community (1) (‘the basic Regulation’), alleging that imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers), originating in (2) the People's Republic of China, are being subsidised and are thereby causing material injury to the Union industry.

1. Complaint

The complaint was lodged on 26 September 2012 by EU ProSun (‘the complainant’) on behalf of producers representing more than 25 % of the total Union production of crystalline silicon photovoltaic modules and key components.

2. Product under investigation

The product subject to this investigation is crystalline silicon photovoltaic modules or panels and cells and wafers of the type used in crystalline silicon photovoltaic modules or panels. The cells and wafers have a thickness not exceeding 400 μm (‘the product under investigation’).

From the product under investigation the following product types are excluded:

—	solar chargers that consist of less than six cells, are portable and supply electricity to devices or charge batteries,

—	thin film photovoltaic products,

—	crystalline silicon photovoltaic products that are permanently integrated into electrical goods, where the function of the electrical goods is other than power generation, and where these electrical goods consume the electricity generated by the integrated crystalline silicon photovoltaic cell(s).

3. Allegation of subsidisation

The product allegedly being subsidised is the product under investigation, originating in the People's Republic of China (‘the country concerned’), currently falling within CN codes ex 3818 00 10, ex 8501 31 00, ex 8501 32 00, ex 8501 33 00, ex 8501 34 00, ex 8501 61 20, ex 8501 61 80, ex 8501 62 00, ex 8501 63 00, ex 8501 64 00 and ex 8541 40 90. These CN codes are given for information only.

It is alleged that the producers of the product under investigation from the People's Republic of China have benefited from a number of subsidies granted by the Government of the People's Republic of China.

The subsidies consist, inter alia, of preferential lending to the solar panel industry (e.g. credit lines and low-interest policy loans granted by State-Owned Commercial Banks and Government Policy Banks, export credit subsidy programmes, export guarantees, insurances for green technologies, granting access to offshore holding companies, loan repayments by Government), grant programmes (e.g. Export Product Research and Development Fund, ‘Famous Brands’ and ‘China World Top Brands’ subsidies, Funds for Outward Expansion of Industries in Guangdong Province, Golden Sun Demonstration Programme), Government provision of goods for less than adequate remuneration (e.g. provision of polysilicon, aluminium extrusions, glass, power and land), direct tax exemption and reduction programmes (e.g. income tax exemptions or reductions under the Two Free/Three Half Programme, income tax exemptions for export-oriented Foreign Invested Enterprises (FIEs), income tax reductions for FIEs based on geographic location, local income tax exemptions and reductions for ‘productive FIEs’, income tax reductions for FIEs purchasing Chinese-made equipment, tax offset for R&D at FIEs, tax refunds for reinvestment of FIEs' profits in export-oriented enterprises, preferential corporate income tax for FIEs recognised as High and New Technology Industries, tax reductions for High and New Technology Enterprises involved in designated projects, preferential income tax policy for enterprises in the North-East Region, Guangdong Province tax programmes) and indirect tax and import tariff programmes (e.g. VAT exemptions for use of imported equipment, VAT rebates on FIEs' purchases of Chinese made equipment, VAT and tariff exemptions for purchases of fixed assets under the Foreign Trade Development Programme).

It is alleged that the above schemes are subsidies since they involve a financial contribution from the Government of the People's Republic of China or other regional governments (including public bodies) and confer a benefit to the recipients. They are alleged to be contingent upon export performance and/or the use of domestic over imported goods and/or are limited to certain sectors and/or types of enterprises and/or locations, and are therefore specific and countervailable.

4. Allegation of injury and causation

The complainant has provided evidence that imports of the product under investigation from the country concerned have increased overall in absolute terms and have increased in terms of market share.

The prima facie evidence provided by the complainant shows that the volume and the prices of the imported product under investigation have had, among other consequences, a negative impact on the level of prices charged by the Union industry and the market share held, resulting in substantial adverse effects on the financial situation of the Union industry.

5. Procedure

Having determined, after consulting the Advisory Committee, that the complaint has been lodged by or on behalf of the Union industry and that there is sufficient evidence to justify the initiation of a proceeding, the Commission hereby initiates an investigation pursuant to Article 10 of the basic Regulation.

The investigation will determine whether the product under investigation originating in the country concerned is being subsidised and whether these subsidised imports have caused injury to the Union industry. If the conclusions are affirmative, the investigation will examine whether the imposition of measures would not be against the Union interest.

The Government of the People's Republic of China has been invited for consultations.

There are indications that the product under investigation frequently incorporates components and parts from different countries. Therefore, companies which ship the product under investigation from the People's Republic of China but consider that part or even all of those exports do not have their customs origin in the People's Republic of China, are invited to come forward in the investigation and to furnish all relevant information. The origin of the product under investigation exported from the country concerned will be examined in the light of that and other information gathered in this investigation. If appropriate, special provisions may be adopted, for instance on the basis of Article 24(3) of the basic Regulation.

5.1. Procedure for the determination of subsidisation

Exporting producers (3) of the product under investigation from the country concerned and the authorities of the country concerned are invited to participate in the Commission investigation.

5.1.1. Investigating exporting producers

5.1.1.1. Procedure for selecting exporting producers to be investigated in the country concerned

(a) Sampling

In view of the potentially large number of exporting producers in the country concerned involved in this proceeding and in order to complete the investigation within the statutory time limits, the Commission may limit the exporting producers to be investigated to a reasonable number by selecting a sample (this process is also referred to as ‘sampling’). The sampling will be carried out in accordance with Article 27 of the basic Regulation.

In order to enable the Commission to decide whether sampling is necessary, and if so, to select a sample, all exporting producers, or representatives acting on their behalf, are hereby requested to make themselves known to the Commission. These parties have to do so within 15 days of the date of publication of this notice in the Official Journal of the European Union, unless otherwise specified, by providing the Commission with information on their company(ies) requested in Annex A to this notice.

In order to obtain information it deems necessary for the selection of the sample of exporting producers, the Commission will also contact the authorities of the country concerned and may contact any known associations of exporting producers.

All interested parties wishing to submit any other relevant information regarding the selection of the sample, excluding the information requested above, must do so within 21 days of the publication of this notice in the Official Journal of the European Union, unless otherwise specified.

If a sample is necessary, it may be based on the largest representative volume of the production, sales or exports which can reasonably be investigated within the time available. All known exporting producers, the authorities of the country concerned and associations of exporting producers will be notified by the Commission, via the authorities of the country concerned if appropriate, of the companies selected to be in the sample.

In order to obtain information it deems necessary for its investigation with regard to exporting producers, the Commission will send questionnaires to the exporting producers selected to be in the sample, to any known association of exporting producers, and to the authorities of the country concerned.

All exporting producers, selected to be in the sample, and the authorities of the country concerned will have to submit a completed questionnaire within 37 days from the date of notification of the sample selection, unless otherwise specified.

The questionnaire for exporting producers will request information on, inter alia, the structure of the exporting producer's company(ies), the activities of the company(ies) in relation to the product under investigation, the total sales of the company(ies) and of the product under investigation and the amount of financial contribution and benefit from the alleged subsidies or subsidy programmes.

The questionnaire for the authorities will request information on, inter alia, the alleged subsidies or subsidy programme(s), the authorities responsible for their operation, the manner and functioning of such operation, the legal basis, the eligibility criteria and other terms and conditions, the recipients and the amount of financial contribution and benefit conferred.

Without prejudice to the application of Article 28 of the basic Regulation companies that have agreed to their possible inclusion in the sample but are not selected to be in the sample will be considered to be cooperating (‘non-sampled cooperating exporting producers’). Without prejudice to section (b) below, the countervailing duty that may be applied to imports from non-sampled cooperating exporting producers will not exceed the weighted average margin of subsidisation established for the exporting producers in the sample (4).

(b) Individual subsidy margin for companies not included in the sample

Non-sampled cooperating exporting producers may request, pursuant to Article 27(3) of the basic Regulation, that the Commission establish their individual subsidy margins. The exporting producers wishing to claim an individual subsidy margin must request a questionnaire and return it duly completed within 37 days of the date of notification of the sample selection, unless otherwise specified.

However, exporting producers claiming an individual subsidy margin should be aware that the Commission may nonetheless decide not to determine their individual subsidy margin if, for instance, the number of exporting producers is so large that such determination would be unduly burdensome and would prevent the timely completion of the investigation.

5.1.2. Investigating unrelated importers (5) (6)

Unrelated importers of the product under investigation from the country concerned to the Union are invited to participate in this investigation.

In view of the potentially large number of unrelated importers involved in this proceeding and in order to complete the investigation within the statutory time limits, the Commission may limit to a reasonable number the unrelated importers that will be investigated by selecting a sample (this process is also referred to as ‘sampling’). The sampling will be carried out in accordance with Article 27 of the basic Regulation.

In order to enable the Commission to decide whether sampling is necessary and, if so, to select a sample, all unrelated importers, or representatives acting on their behalf, are hereby requested to make themselves known to the Commission. These parties must do so within 15 days of the date of publication of this notice in the Official Journal of the European Union, unless otherwise specified, by providing the Commission with the information on their company(ies) requested in Annex B to this notice.

In order to obtain information it deems necessary for the selection of the sample of unrelated importers, the Commission may also contact any known associations of importers.

If a sample is necessary, the importers may be selected based on the largest representative volume of sales of the product under investigation in the Union which can reasonably be investigated within the time available. All known unrelated importers and associations of importers will be notified by the Commission of the companies selected to be in the sample.

In order to obtain information it deems necessary for its investigation, the Commission will send questionnaires to the sampled unrelated importers and to any known association of importers. These parties must submit a completed questionnaire within 37 days from the date of the notification of the sample selection, unless otherwise specified.

The questionnaire will request information on, inter alia, the structure of their company(ies), the activities of the company(ies) in relation to the product under investigation and the sales of the product under investigation.

5.2. Procedure for the determination of injury and investigating Union producers

A determination of injury is based on positive evidence and involves an objective examination of the volume of the subsidised imports, their effect on prices on the Union market and the consequent impact of those imports on the Union industry. In order to establish whether the Union industry is materially injured, Union producers of the product under investigation are invited to participate in the Commission investigation.

5.2.1. Investigating Union producers

In view of the large number of Union producers involved in this proceeding and in order to complete the investigation within the statutory time limits, the Commission has decided to limit to a reasonable number the Union producers that will be investigated by selecting a sample (this process is also referred to as ‘sampling’). The sampling is carried out in accordance with Article 27 of the basic Regulation.

The Commission has provisionally selected a sample of Union producers. Details can be found in the file for inspection by interested parties. Interested parties are hereby invited to consult the file (for this they should contact the Commission using the contact details provided in section 5.6 below). Other Union producers, or representatives acting on their behalf, that consider that there are reasons why they should be included in the sample must contact the Commission within 15 days of the date of publication of this notice in the Official Journal of the European Union. All interested parties wishing to submit any other relevant information regarding the selection of the sample must do so within 21 days of the publication of this notice in the Official Journal of the European Union, unless otherwise specified.

All known Union producers and/or associations of Union producers will be notified by the Commission of the companies finally selected to be in the sample.

In order to obtain information it deems necessary for its investigation, the Commission will send questionnaires to the sampled Union producers and to any known association of Union producers. These parties must submit a completed questionnaire within 37 days from the date of the notification of the sample selection, unless otherwise specified.

The questionnaire will request information on, inter alia, the structure of their company(ies) and the financial and economic situation of the company(ies).

5.3. Procedure for the assessment of Union interest

Should the existence of subsidisation and injury caused thereby be established, a decision will be reached, pursuant to Article 31 of the basic Regulation, as to whether the adoption of anti-subsidy measures would not be against the Union interest. Union producers, importers and their representative associations, users and their representative associations, and representative consumer organisations are invited to make themselves known within 15 days of the date of publication of this notice in the Official Journal of the European Union, unless otherwise specified. In order to participate in the investigation, the representative consumer organisations have to demonstrate, within the same deadline, that there is an objective link between their activities and the product under investigation.

Parties that make themselves known within the above deadline may provide the Commission with information on the Union interest within 37 days of the date of publication of this notice in the Official Journal of the European Union, unless otherwise specified. This information may be provided either in a free format or by completing a questionnaire prepared by the Commission. In any case, information submitted pursuant to Article 31 will only be taken into account if supported by factual evidence at the time of submission.

5.4. Other written submissions

Subject to the provisions of this notice, all interested parties are hereby invited to make their views known, submit information and provide supporting evidence. Unless otherwise specified, this information and supporting evidence must reach the Commission within 37 days of the date of publication of this notice in the Official Journal of the European Union.

5.5. Possibility to be heard by the Commission investigation services

All interested parties may request to be heard by the Commission investigation services. Any request to be heard should be made in writing and should specify the reasons for the request. For hearings on issues pertaining to the initial stage of the investigation the request must be submitted within 15 days of the date of publication of this notice in the Official Journal of the European Union. Thereafter, a request to be heard must be submitted within the specific deadlines set by the Commission in its communication with the parties.

5.6. Instructions for making written submissions and sending completed questionnaires and correspondence

All written submissions, including the information requested in this notice, completed questionnaires and correspondence provided by interested parties for which confidential treatment is requested shall be labelled ‘Limited’ (7).

Interested parties providing ‘Limited’ information are required to furnish non-confidential summaries of it pursuant to Article 29(2) of the basic Regulation, which will be labelled ‘For inspection by interested parties’. These summaries should be sufficiently detailed to permit a reasonable understanding of the substance of the information submitted in confidence. If an interested party providing confidential information does not furnish a non-confidential summary of it in the requested format and quality, such confidential information may be disregarded.

Interested parties are required to make all submissions and requests in electronic format (non-confidential submissions via e-mail, confidential ones on CD-R/DVD), and must indicate the name, address, e-mail address, telephone and fax numbers of the interested party. However, any Powers of Attorney, signed certifications, and any updates thereof, accompanying questionnaire replies must be submitted on paper, i.e. by post or by hand, at the address below. If an interested party cannot provide its submissions and requests in electronic format, it must immediately contact the Commission in compliance with Article 28(2) of the basic Regulation. For further information concerning correspondence with the Commission, interested parties may consult the relevant web page on the website of the Directorate-General for Trade: http://ec.europa.eu/trade/tackling-unfair-trade/trade-defence

Commission address for correspondence:

European Commission

Directorate-General for Trade

Directorate H

Office: N105 08/020

1049 Bruxelles/Brussel

BELGIQUE/BELGIË

Fax +32 22985514 (only for correspondence regarding points 3, 5.1.1 and Annex A)

+32 22956505 (for other issues)

E-mail: trade-solar-subsidy@ec.europa.eu (only for correspondence regarding points 3, 5.1.1 and Annex A)

trade-solar-injury@ec.europa.eu (for other issues)

6. Non-cooperation

In cases where any interested party refuses access to or does not provide the necessary information within the time limits, or significantly impedes the investigation, provisional or final findings, affirmative or negative, may be made on the basis of facts available, in accordance with Article 28 of the basic Regulation.

Where it is found that any interested party has supplied false or misleading information, the information may be disregarded and use may be made of facts available.

If an interested party does not cooperate or cooperates only partially and findings are therefore based on facts available in accordance with Article 28 of the basic Regulation, the result may be less favourable to that party than if it had cooperated.

7. Hearing Officer

Interested parties may request the intervention of the Hearing Officer for the Directorate-General for Trade. The Hearing Officer acts as an interface between the interested parties and the Commission investigation services. The Hearing Officer reviews requests for access to the file, disputes regarding the confidentiality of documents, requests for extension of time limits and requests by third parties to be heard. The Hearing Officer may organise a hearing with an individual interested party and mediate to ensure that the interested parties' rights of defence are being fully exercised.

A request for a hearing with the Hearing Officer should be made in writing and should specify the reasons for the request. For hearings on issues pertaining to the initial stage of the investigation the request must be submitted within 15 days of the date of publication of this notice in the Official Journal of the European Union. Thereafter, a request to be heard must be submitted within specific deadlines set by the Commission in its communication with the parties.

The Hearing Officer will also provide opportunities for a hearing involving parties to take place which would allow different views to be presented and rebuttal arguments offered on issues pertaining, among other things, to subsidisation, injury, causal link and Union interest. Such a hearing would, as a rule, take place at the latest at the end of the fourth week following the disclosure of provisional findings.

For further information and contact details interested parties may consult the Hearing Officer's web pages on DG Trade's website: http://ec.europa.eu/trade/tackling-unfair-trade/hearing-officer/index_en.htm

8. Schedule of the investigation

The investigation will be concluded, pursuant to Article 11(9) of the basic Regulation within 13 months of the date of the publication of this notice in the Official Journal of the European Union. In accordance with Article 12(1) of the basic Regulation, provisional measures may be imposed no later than nine months from the publication of this notice in the Official Journal of the European Union.

9. Processing of personal data

Any personal data collected in this investigation will be treated in accordance with Regulation (EC) No 45/2001 of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (8).

(1) OJ L 188, 18.7.2009, p. 93.

(2) Please see below in point 5, last subparagraph, for important information for companies which ship the product under investigation to the EU from the People's Republic of China but consider that all or part of those exports do not have their customs origin in the People's Republic of China.

(3) An exporting producer is any company in the country concerned which produces and exports the product under investigation to the Union market, either directly or via a third party, including any of its related companies involved in the production, domestic sales or exports of the product under investigation.

(4) Pursuant to Article 15(3) of the basic Regulation, any zero and de minimis amounts of countervailable subsidies and amounts of countervailable subsidies established in the circumstances referred to in Article 28 of the basic Regulation shall be disregarded.

(5) Only importers not related to exporting producers can be sampled. Importers that are related to exporting producers have to fill in Annex 1 to the questionnaire for these exporting producers. In accordance with Article 143 of Commission Regulation (EEC) No 2454/93 concerning the implementation of the Community Customs Code, persons shall be deemed to be related only if: (a) they are officers or directors of one another's businesses; (b) they are legally recognized partners in business; (c) they are employer and employee; (d) any person directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares of both of them; (e) one of them directly or indirectly controls the other; (f) both of them are directly or indirectly controlled by a third person; (g) together they directly or indirectly control a third person; or (h) they are members of the same family. Persons shall be deemed to be members of the same family only if they stand in any of the following relationships to one another: (i) husband and wife, (ii) parent and child, (iii) brother and sister (whether by whole or half blood), (iv) grandparent and grandchild, (v) uncle or aunt and nephew or niece, (vi) parent-in-law and son-in-law or daughter-in-law, (vii) brother-in-law and sister-in-law. (OJ L 253, 11.10.1993, p. 1). In this context ‘person’ means any natural or legal person.

(6) The data provided by unrelated importers may also be used in relation to aspects of this investigation other than the determination of subsidisation.

(7) A ‘Limited’ document is a document which is considered confidential pursuant to Article 29 of Council Regulation (EC) No 597/2009 (OJ L 188, 18.7.2009, p. 93) and Article 12 of the WTO Agreement on Subsidies and Countervailing Measures. It is also a document protected pursuant to Article 4 of Regulation (EC) No 1049/2001 of the European Parliament and of the Council (OJ L 145, 31.5.2001, p. 43).

(8) OJ L 8, 12.1.2001, p. 1.

ANNEX A

ANNEX B

		ISSN 1977-091X doi:10.3000/1977091X.C_2012.340.eng
Official Journal of the European Union		C 340

English edition	Information and Notices	Volume 55 8 November 2012

Notice No	Contents	page
	IV Notices
	NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES
	European Commission
2012/C 340/01	Euro exchange rates	1

	NOTICES CONCERNING THE EUROPEAN ECONOMIC AREA
	EFTA Surveillance Authority
2012/C 340/02	EFTA Surveillance Authority Decision No 264/12/COL of 5 July 2012 concerning the status of Norway with regard to infectious haematopoietic necrosis and viral haemorrhagic septicaemia and repealing the EFTA Surveillance Authority Decision No 302/08/COL	2

2012/C 340/03	EFTA Surveillance Authority Decision No 265/12/COL of 5 July 2012 to approve the contingency plan for listed exotic diseases in aquatic animals submitted by Norway	4

2012/C 340/04	EFTA Surveillance Authority Recommendation of 13 April 2011 on the regulatory treatment of fixed and mobile termination rates in the EFTA States	5

	V Announcements
	ADMINISTRATIVE PROCEDURES
	European Personnel Selection Office (EPSO)
2012/C 340/05	Notice of open competition	12

	PROCEDURES RELATING TO THE IMPLEMENTATION OF THE COMMON COMMERCIAL POLICY
	European Commission
2012/C 340/06	Notice of initiation of an anti-subsidy proceeding concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in the People's Republic of China	13

	Currency	Exchange rate
USD	US dollar	1,2746
JPY	Japanese yen	102,11
DKK	Danish krone	7,4594
GBP	Pound sterling	0,79840
SEK	Swedish krona	8,5547
CHF	Swiss franc	1,2065
ISK	Iceland króna
NOK	Norwegian krone	7,3195
BGN	Bulgarian lev	1,9558
CZK	Czech koruna	25,395
HUF	Hungarian forint	282,10
LTL	Lithuanian litas	3,4528
LVL	Latvian lats	0,6963
PLN	Polish zloty	4,1131
RON	Romanian leu	4,5163
TRY	Turkish lira	2,2713
AUD	Australian dollar	1,2228
CAD	Canadian dollar	1,2662
HKD	Hong Kong dollar	9,8788
NZD	New Zealand dollar	1,5403
SGD	Singapore dollar	1,5586
KRW	South Korean won	1 384,34
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MYR	Malaysian ringgit	3,8917
PHP	Philippine peso	52,183
RUB	Russian rouble	40,0973
THB	Thai baht	39,117
BRL	Brazilian real	2,5911
MXN	Mexican peso	16,5991
INR	Indian rupee	69,1020