2. These Guidelines constitute binding Regulations that state the official policies and procedures of the TRA during their period of validity. These Guidelines may be subject to review and amendment following the consultation and promulgation processes required by the law. Review and amendment hereof will be undertaken periodically as deemed necessary by the TRA in light of the development of the Lebanese telecommunications markets and/or changes to Lebanese national law impacting the Telecommunications Sector, among other possibilities.

1.2 Legal Basis

1.2.1 Telecommunication Policy

3. The Government of Lebanon having determined to transform the telecommunications sector in Lebanon from a state-owned monopoly to a competitive market, open to private participation promulgated the Telecommunications Law (Law No. 431/2002, hereafter called the “Law” or “Telecommunications Law”) to achieve this aim.

1.2.2 The TRA’s Mandate and the Telecommunications Law

4. The Telecommunications Law ensures that an open, competitive market will bring pressure to bear on Service Providers and will lead to increased penetration of telecommunications services, lowering prices, improving efficiency of Service Providers and enhancing the quality and choice of services. Accordingly, the TRA is provided with wide ranging powers to promote competition and to guard against anti-competitive behaviour which would distort this market-based, competitive process. The provisions in the Telecommunications Law which address anti-competitive behaviour are consistent with the WTO Reference Paper on Regulatory Principles.[1]

5. The TRA is charged with promoting competition in telecommunications (Telecommunications Law, Art. 5.1(C)). To that end, the Telecommunications Law has given the TRA a clear mandate to, among other things:

· Establish an open, clear and transparent regulatory framework that minimizes legal, regulatory, and other barriers to entry;

· Issue licenses;

· Identify Service Providers with Significant Market Power;

· Monitor and prevent abuses of Significant Market Power;

· Monitor and prevent practices that would restrict competition;

· Review any transaction or transactional relationship (e.g., interconnection), particularly involving Service Providers with Significant Market Power, to ensure that they will not restrict, undermine or distort competition; and,

· Take all necessary measures, whether preventive (i.e., before abuse of Significant Market Power) or remedial (i.e., after abuse of Significant market Power), to protect competition and ensure a sustainable competitive market.

6. Should the TRA find a potential or actual situation which diminishes competition, the TRA may take such measures as it deems necessary. While Service Providers with Significant Market Power are singled out for greater attention, the TRA is encouraged to take measures to increase competition rather than imposing restrictions on these Service Providers. In countering anti-competitive behaviour generally, the TRA is also encouraged to benefit from best international practices by considering applicable principles of competition law in countries with competitive telecommunications markets.

7. The concept of “Significant Market Power” used in the competition provision of the Telecommunications Law (Article 30) is threaded through other sections of the said law, including provisions relating to interconnection (Article 29), rate and tariff regulation (Article 28), and the resale of services (Article 27). Consistent with best international practices and the WTO Reference Paper, a Service Provider with Significant Market Power is one that can materially affect participation in a market for a service as a result of its control over essential facilities or use of its position in the market.

8. The Telecommunication Law provides for the regulation of the telecommunications sector in Lebanon by the TRA, mandating that it, inter alia, acts against anti-competitive behaviour and ensures market transparency and supervises Providers with Significant Market Power[2] (SMP). The authority and mandates of the TRA in this regard encompass specific provisions both authorizing the TRA to constrain Providers with SMP and providing for restrictions on such Providers, including initiating investigations, making determination, and imposing additional obligations upon such Providers. Beyond these mandates and specific provisions of the Law, the TRA may make reference to the principles and laws of other jurisdictions[3].

1.2.3 TRA jurisdiction in context of other relevant Laws

9. Given the interrelated nature of markets for goods and services, particularly those requiring or required by Telecommunications, the TRA understands that its jurisdiction and substantive standards concerning potentially anti-competitive conduct and particularly SMP are liable to affect and be affected by the standards and actions of other relevant governmental bodies and institutions.

10. The TRA will assume the precedence of the Law as a lex specialis over other generally applicable laws that apply when determining the appropriate substantive standards and practices promulgated in the present SMP Guidelines. Regarding its jurisdiction over potentially anti-competitive conduct within the market for Telecommunications Services, the TRA will assume primary jurisdiction over such matters where it has jurisdiction over the parties potentially liable. In all other cases, the TRA will coordinate its actions with the appropriate governmental body involved and/or refer appropriate complaints, investigations or cases to such bodies. The following describes the understanding of the TRA with respect to several such norms and institutions:

11. The TRA notes that it may have shared jurisdiction over competition issues with such regulatory bodies as may be created by virtue of a competition act under consideration by the government of Lebanon. Competition law sets generally applicable standards for all market actors and designates an appropriate regulatory with investigating and redressing conduct found to be in violation. Insofar as the provisions of the Law and these Guidelines issued thereunder constitute a more specific and more extensive basis for both preventive (ex-ante) and remedial (ex-post) action, in addition to the TRA’s specific expertise in the subject matter, TRA will assert primary jurisdiction where competition issues concern solely Persons and Services subject to its jurisdiction under the Law. In all other cases, including those concerning or concerned with telecommunications markets or goods, but including Persons not subject to jurisdiction by the TRA, the TRA will seek to refer the matter to the appropriate competition regulator.

12. With regard to certain other laws ancillary to anti-competitive conduct and the bodies charged with their enforcement, including the protection of consumers under the aegis of the Ministry of Economy and Trade and the regulation of broadcasting matters other than Spectrum by the Ministry of Information, see the Consumer Protection Guidelines and the Spectrum Guidelines respectively for a detailed discussion.

1.3 Interpretation

13. Individual clauses containing the word ‘shall’ are mandatory requirements and are binding on licensed Providers of Telecommunications Services and applicants for such Licences.

14. Individual clauses containing the word ‘should’ are recommendations to Providers but are not mandatory in and of themselves.

15. Individual clauses containing the word ‘may’ are permissions to Providers.

16. Individual clauses containing the word ‘will’ when applied to the TRA mean a non-discretionary obligation for the TRA to act.

1.4 Purpose of the Guidelines

17. The principal purpose of these Guidelines is to provide information and guidance to Providers with respect to the approach TRA will take in analysing the telecommunications markets, assessing if Providers have SMP and making declarations accordingly.

18. The Guidelines describe processes designed to ensure that all Providers and applicants for Provider status are treated fairly and in a non-discriminatory manner.

19. The Guidelines also aim to encourage good practice by Providers and to promote the provision of high quality of service to end-users, through technical and economic efficiency.

20. TRA’s programme to control SMP will consist of four activities:

21. Define Relevant Markets in terms of product/services, customer groups, retail/wholesale and geography/route.

22. Carry out market analyses of each of the Relevant Markets, to determine whether any Providers have Significant Market Power (SMP), in those Relevant Markets.

23. Issue Decisions as to Providers having Significant Market Power in a Relevant Market.

24. Impose regulatory obligations on those Providers identified as having SMP.

25. These Guidelines apply to all Providers of Telecommunications Services in Lebanon.

26. These Guidelines do not apply to end-users of Telecommunications Services; they also do not apply to the importation and making available of Customer Premise Equipment (CPE) or Network Equipment of any kind.

27. These Guidelines include the following schedules:

1. Schedule A: Retail Markets

2. Schedule B: Wholesale Markets.

28. These Guidelines become effective when issued by the TRA Board and published in the Official Gazette and/or on the TRA website.

2 Definitions

29. In the event of conflict or ambiguity between the terms defined herein and the terms defined in the Licence or in the Telecommunications Law then the following order of precedence shall apply:

1. Telecommunications Law

2. The SMP Guidelines

3. Provider Licence.

30. For the purposes of use in The Guidelines, the following terms will have the ascribed meanings:

Affiliate means any legal entity licensed to provide Telecommunications Services (a Provider) that is under common ownership or Control of another entity, directly or indirectly, where that other entity is a licensed Provider of Telecommunications Services. Where affiliation exists by means of ownership, a level of ownership sufficient to reach Control as defined herein will confer Affiliate status. Moreover, affiliation may also be found where Control is exercised through a third entity, whether or not such entity is a licensed Provider, when two or more Provider entities are controlled by it through whatever means. A Provider may also acquire Affiliate status by virtue of a management agreement of whatever kind when the managing entity is, or is controlled by another Provider.

Accounting Separation means the preparation of separate accounts for different businesses and parts of businesses run by the same company or group of companies, so that the costs and revenues associated with each business and part of a business (and transfers between them) can be separately identified and properly allocated.

Authority means the Telecommunications Regulatory Authority in Lebanon established by virtue of the Telecommunications Law (Law 431/2002).

Basic Telephony Services are Public Telecommunications Services limited to two-way real-time voice transmission within all of Lebanon offered as a Fixed Telecommunication Service over a Self-operated Network. Basic Telephony Services are classified for licensing purposes as requiring a Public Fixed Network licence.

Board in these Guidelines refers to the Board of the TRA constituted as the duly established management of the Authority and acting through a quorum of members.

Call Origination – the service of originating calls on a network, for completion either on the same or a different network.

Call Termination - the service of terminating calls on a network, whether originated on the same or a different network.

Carrier Pre-Selection – election by the customer of which Provider (or Carrier) will provide service on a permanent or semi-permanent basis.

Carrier Selection - election by the customer of which Provider (or Carrier) will provide service on a call-by-call basis.

Collective SMP – Significant Market Power attributable to two or more Providers collectively, through collusion, joint ownership, or other means.

Consumer is any natural or judicial person other than a Provider of Telecommunications Services. See also End-User.

Control is one measure which the TRA may use to determine the applicability of licensing or other ongoing regulatory obligations. Control over a Provider is defined either (a) in terms of direct or indirect ownership stakes of sufficient magnitude to exert power over the management of that Provider, or (b) where the management of an entity, whether by contract or otherwise, is carried out by another person or entity. Control over a Provider through ownership does not require majority ownership but may be exercised by a minority stakeholder capable of blocking decisions. Control over Infrastructure by a Provider is defined as any form of effective operational control over a Network and its use to deliver Telecommunications Services. A change of Control occurs when either (a) a blocking minority ownership changes hands irrespective of the form of the transaction, or (b) the management of a Provider is turned over to another person or entity in whole or in substantial part.

Cost Accounting - Service Providers with Significant Market Power shall develop cost oriented interconnection rates according to costing methodology and cost accounting guidelines prescribed by the TRA.

Customer means the Person who receives Telecommunications Services and pays the corresponding fees for a period of time by virtue of an agreement with or pursuant to terms established by the Service Provider.

Customer Premises Equipment (CPE) means any technical devices, including wiring that are suitable for connecting to the Network Termination Interface that is owned or controlled by an End User within his or her private premises without commercial purpose and which may be used to originate, route, terminate, store or convert any communication over the network. Importation, sale and use of such CPE may be subject to equipment standards specified in the Radio and Telecommunications Terminal Equipment (RTTE) Type Approval Guidelines but is not subject to licensing under the present Guidelines.

Decisions of the TRA are one form of Regulation by which the TRA, either by its Board or by delegated authority determines the rights and obligations of a specific party or for a specific situation subject to its jurisdiction.

Designated Service is a Telecommunications Service so designated by Decision of the TRA in consequence of an SMP finding of limited competition in a specific, limited geographic and service market. A Designated Service is associated with one specific Provider having SMP.

End User (or User) means any natural or judicial person, excluding Providers of Telecommunications Services, purchasing, consuming or using Telecommunications Services solely for their own consumption. Irrespective of whether an End User is an individual, household, or institutions of any kind, such End User may not provide access to Telecommunications Services to persons outside their respective Defined User Group, nor provide access on a commercial scale or for profit. End Users are Consumers.

Guidelines are TRA Regulations of generally binding effect as opposed to Decisions applicable only to named parties or situations. In the present text and unless otherwise stated, Guidelines mean the effective version of the present guidelines. Guidelines may be revised or amended by the TRA from time to time in accordance with its procedures, in which case any prior version or particular provisions thereof as the case may be, cease to be of any force and effect and may no longer be relied on.

Hypothetical Monopolist Test is a test to determine whether a Provider could increase prices in a market whilst retaining its volume of business.[4]

International Telephony is a Telecommunication Service for the provision of International voice service.

Internet Services are Data Services offering termination to the Internet provided as End-User Services. The Provider of such services is termed an Internet Service Provider (ISP).

Licence means an authorization granted under the Law and the Licensing Guidelines to provide Telecommunications Services, including, where applicable, the use of Radio Spectrum required to provide such service.

Network Equipment – equipment other than CPE, used within or attached to Networks by Providers in whole or in part to provide retail or wholesale services to customers.

Non-discrimination means supplying the same product/service to different customers on the same financial, technical and service terms.

Number Portability – service which will allow customers to change Provider whilst maintaining their access number.

Price Cap - A method of setting prices whereby the SMP Provider is given a limit on the average per usage (or per customer) revenue it may collect, but within that is given flexibility on how to set the prices, and is permitted to recover profits above those cost-of-service regulation would consider reasonable, up to some limit, as an incentive to be more efficient.

Provider means any individual or legal person providing Telecommunications Services to others on a commercial scale or for profit. The TRA may by Guideline or Decision set forth specific criteria concerning the scale of operations sufficient for a person to be considered operating on a commercial scale.

Regulations, or TRA Regulations, mean that body of rules promulgated by the TRA under the authority granted to it by the Telecommunications Law. Regulations take the form of Guidelines or Decisions. In addition to Regulations, the TRA may also promulgate non-binding documents which are not considered Regulations.

Relevant Market means a market segment as defined by TRA for purposes of determining Significant Market Power.

Retail Obligations means obligations on Providers to offer retail services under conditions of price, availability, quality, or other obligations.

Significant Market Power (SMP) It is the output of a metric of competition in a particular market or markets for Telecommunications Services. An undertaking shall be deemed to have Significant Market Power if, either individually or jointly with others, it enjoys a position equivalent to Dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers. A determination by the TRA of a Provider as having SMP results in specific additional obligations upon such provider as specified by the Law and further specified in the SMP Guidelines. TRA shall use SMP or the more common term “dominance” interchangeably.

Telecommunications Equipment in the present Guidelines means any equipment forming part of, or necessary to the network infrastructure, other than CPE.

Telecommunications Services means the provision of services inclusive of the transmission/reception and routing of information in a potentially interactive manner by any technological means. Telecommunications Services also means the provision of Infrastructure or elements thereof necessary for the provision of such services. Telecommunications Services include specific service categories, including but not limited to Network and End-User Services, Telephony, Value-Added Telecommunications Services, and Telecommunications Services provided to the Public or Restricted groups of persons (Defined User Groups or Licence Areas/Service Territories). The provision of any Telecommunications Service in Lebanon comes under the jurisdiction of the TRA and is subject to a Licence.

Telecommunications Regulations means the Telecommunications Law and all decrees issued in implementation thereof as well as all regulations and decisions issued by the TRA on the basis of the Telecommunications Law or implementing decrees.

Transparency means the TRA or Providers with Significant Market Power shall make public specified information such as the process by which TRA has arrived at a Decision or a reference interconnection offer from a Provider, with terms and conditions for interconnection, technical specifications, prices for interconnection services and cost accounting information.

TRA the Telecommunications Regulatory Authority of Lebanon.

Unbundled Services Services provided in component parts.

Wholesale Obligations means obligations on Providers to offer wholesale services under conditions of price, availability, quality or other obligations.

3 Market Definition Procedure

3.1 Relevant Market definition

31. TRA will define Relevant Markets as a precondition to any decision to adopt ex-ante regulatory measures.

32. TRA considers a Relevant Market comprises all those products and/or services that are regarded as interchangeable or substitutable by the user, due to the products’ characteristics, prices, and intended use(s).

33. TRA considers that the definition of Relevant Markets will have three dimensions:

34. the Telecommunications Services included;

35. the customer groups served;

36. The geography and/or route affected.

3.2 Services

37. To group services into Relevant Markets, TRA will consider primarily demand-side substitutability. The reaction of marginal customers to a shift in prices will be the pivotal element of market definition.

38. TRA will consider retail and wholesale services separately. The objective characteristics, intended uses, and pricing arrangements are generally different, as are the parties involved in the transactions.

3.3 Demand-side Substitutability

39. TRA will attach great significance to demand-side substitutability in its market definition exercises, on the basis that it represents the most immediate and effective disciplinary force on the suppliers of a product or service.

40. TRA will examine evidence of consumer behaviour, relative prices and price movements of potentially competing products, and switching costs, which may hinder consumers from substituting a product or service for another[5].

41. TRA will use the “Hypothetical Monopolist Test”. This test requires an analysis of whether consumers of a particular product or service would be likely to switch to readily available substitutes in the short term and at a negligible cost in response to a hypothetical small (in the range of 5 to 10%) but permanent price increase applied to the products under consideration by the largest supplier.

3.4 Supply-side Substitutability

42. Supply-side substitutability will only form part of TRA’s market definition analysis if demand-side substitutability does not result in a clear definition of Relevant Markets.

43. If required, TRA will assess supply-side substitutability based on the overall costs to a Provider of switching production to the service in question and any legal, statutory, or other regulatory requirements which could defeat a time-efficient entry into the relevant market, for example: delays and obstacles in concluding agreements for collocation, interconnection or access, or rights of way.

44. TRA will not take into account supply-side substitutability for the definition of a Relevant Market where it would entail significant changes to existing tangible and intangible assets, additional investments, strategic decisions, or time delays.

3.5 Retail Services

45. At the retail level, TRA may distinguish between services provided at fixed locations and those provided to non-fixed locations. A further distinction may also be made between voice services and non-voice (data) services. These distinctions for the purposes of analysing markets do not imply an advance judgement that these services constitute separate Relevant Markets.

46. TRA will consider whether a distinction should be made between access and outgoing calls. A Provider may make a decision to enter the combined market for access and calls or simply enter part or all of the calls market.

47. TRA will analyse whether fixed access (both direct and indirect) for voice services over the PSTN or new fixed entrants’ networks may be substitutable with access provided over upgraded cable networks, wireless local loop and unbundled local loops.

48. TRA will test whether mobile access is perceived to be a substitute for fixed access for voice calls among particular customer groups.

49. TRA considers that the principle factors in determining Relevant Markets in the leased line sector are:

50. speed of transmission;

51. availability of local termination;

52. distance – city, national, international, etc.;

53. quality and reliability differences.

54. TRA will analyse at the retail level the markets listed at Schedule A. The list in Schedule A may be amended from time-to-time.

3.6 Wholesale Services

55. TRA will define Relevant Markets at the wholesale level by starting with retail markets, which usually establish the parameters of the corresponding wholesale markets.

56. TRA will analyse at the wholesale level the markets listed at Schedule B. The list in Schedule B may be amended from time-to-time.

3.7 Customer Groups

57. Because Providers’ offers of services, prices, access methods, and terms of business may vary between customer groups, TRA will distinguish in its analysis between groups of customers insofar as required to delimit the market or markets at issue.

3.8 Geographic Aspects of Relevant Markets

58. Providers may be active only in specific geographic areas or routes. Hence area or route covered is important in defining Relevant Markets.

59. TRA will define relevant geographic markets as the areas in which the objective conditions of competition are similar, and competitors are able to offer their services.

60. TRA will characterise the geographic dimension of Relevant Markets, taking into account:

61. the extent and coverage of the network and the customers that can economically be reached and whose demands may be met, and

62. any legal or regulatory barriers limiting competitors and their right to provide a service or services in a defined area.

63. At the international level, a Relevant Market may be global, regional, or route-specific. A route-specific market for switched services may be appropriate where there is a non-liberalised regime at one end of the route, or terms of access for new entrants are relatively unattractive compared to those available to members of the relevant cable consortium, thereby eliminating any reasonable prospect of entering the end market or for substituting other routes.

64. TRA will consider whether it is appropriate to characterise the geographic dimension of wholesale Relevant Markets between local, regional, national, and international services, or whether another basis should be considered.

4 Determination of SMP

65. TRA will determine whether a Relevant Market is effectively competitive in a given geographic area to determine whether to impose, maintain, amend, or withdraw obligations on Providers considered to have SMP. A relevant market will not be effectively competitive where there are one or more Providers with SMP.

66. A Provider will be deemed to have SMP if, either individually or jointly with others, it enjoys a position of economic strength affording it the power to behave to an appreciable extent independently of competitors and customers. Such a situation will be referred to as Designated Service.

67. A Provider may be deemed to have SMP either individually or jointly with other Providers in a Relevant Market. In addition, where a Provider has SMP in a specific Relevant Market, it may also be deemed to have SMP in a closely related market, where the links between the two markets are such as to allow the market power held in one market to be leveraged into the other market, thereby strengthening the market power of the Provider.

4.1 Criteria for Identifying SMP

68. The criteria TRA will apply in order to identify SMP in a defined Relevant Market can include, but are not limited to:

69. Situation in the Relevant Market

70. rate of growth;

71. technological advances and degree of innovation;

72. number of potential competitors;

73. the degree of price competition

74. the development of prices over time,

75. the degree of competition on quality

76. the degree of differentiation of products;

77. the extent to which the consumers are satisfied with the service choices, quality and price;

78. whether the same or comparable choice, quality and price is available as in comparable markets in other countries.

79. Market Position of Provider

80. market share and market concentration. High and stable market shares do not always indicate that a Provider has SMP: the historic position and current trends are also relevant;

81. overall size of the Provider;

82. access to capital markets and financial resources;

83. strength of brand and brand loyalty;

84. experience in the marketplace;

85. length of time the Provider has been in a strong position;

86. economies of scale;

87. economies of scope;

88. the ability of the Provider to influence market conditions especially prices;

89. excessive pricing and profitability. A Provider's opportunity to price at a significantly higher level than the underlying costs, or to increase prices without a corresponding loss of sales revenues is an indicator of SMP. If a major Provider in a market has high profitability compared to major Providers in comparable markets elsewhere, this may thus indicate SMP. However allowance must be made for high profitability being the result of factors other than monopoly pricing, for example the benefits of scale, efficiency gains or innovation. Correspondingly, low profitability is not necessarily an argument against a Provider having SMP.

90. Ease of entry to market

91. entry barriers related to control of infrastructure by a Provider, in particular control of the means of access to End Users; control of other infrastructure not easily replicated; or brand strength of existing Providers;

92. control of transit services by a Provider;

93. utilization of excess capacity. If a Provider has significant excess capacity, this may result in an entry or growth barrier to others. In the event of an increase in demand in the market, the Provider can increase production without major investment and thus prevent new Providers entering or winning market share;

94. product diversification/bundling of products;

95. degree of vertical integration of Provider;

96. size of distribution and sales network of Provider;

97. technological advantages or superiority.

98. Demand-side factors

99. countervailing buying power;

100. switching costs and lock-in effects. If there are restrictions or costs for End Users changing Provider, this increases the opportunity for a Provider to gain SMP. Such restrictions may be of a practical, technical, or financial nature, or may arise because the End Users have greater confidence in existing and well-established Providers rather than new Providers and will not take the risk of switching;

101. End Users' access to information. For the End Users to make an effective choice between the Providers in a market (in initial purchase or switching), they must have access to information that makes it possible to carry out a comparison of the offerings in the market. Use of complicated price structures, bonus and discount arrangements etc. restricts the opportunities for effective End User choice and may contribute to strengthening a Provider's power in the market.

102. Collective SMP

103. any evidence of Collective SMP will be assessed.

4.2 Identifying Individual SMP

104. TRA will investigate whether there are one or more Providers with SMP in each Relevant Market.

105. Such investigations will take place annually, or may be triggered by proposed changes of ownership of Providers, or by complaints received about anti-competitive behaviour.

106. SMP will be measured primarily as the power of the Provider concerned to raise prices without incurring a significant loss of sales or revenues.

107. TRA will take into account all the relevant criteria in assessing whether a Provider has SMP in a Relevant Market. However, it is not possible to define in advance the weights to be applied to each criterion in any given market assessment, and these weights may vary between the Relevant Markets. Market share, market concentration, and the presence of lasting market entry barriers will be key criteria in every assessment. Both the current and prospective situation (e.g. in cases of proposed changes of ownership or concentrations in the sector), will be taken into account. A conclusion that a Provider has SMP may be based on a combination of different criteria which, each on its own, is not necessarily enough to prove SMP.

108. If there are indications of an actual or prospective failure in competition, this could support a determination that a Provider has, or would have, SMP. However, such an indication will not in itself be sufficient to designate a Provider as having SMP, and caution will be exercised against placing too much weight on such indicators. The indicators may be used to choose measures to promote competition in the relevant market.

109. TRA’s analysis of SMP will include an assessment of whether the market is likely to become competitive in the near future, and thus whether any lack of effective competition is durable.

110. TRA will take appropriate account of the existence of any regulation that affects the result, for example price control or obligations regarding non-discrimination.

111. Where TRA determines that a Provider has SMP in a Relevant Market, the services that Provider provides in that market shall be referred to as Designated Services.

112. TRA will post and maintain on its website a current list of all Service Providers with Significant Market Power, specifying the relevant market in which the designation has been made.

113. The designation of a Provider as having SMP in a Relevant Market implies that the Provider either has behaved and can be expected to continue to behave, or could behave, in the short and medium-term to an appreciable extent independently of competitors and customers.

114. If the market analysis does not provide grounds to designate any Provider with SMP, the Relevant Market will not qualify for sector-specific ex-ante regulation.

115. TRA will conduct regular market assessments to ensure that decisions on SMP remain relevant. A designated SMP Provider can request such reviews annually, or more frequently at such Provider’s expense.

4.3 Identifying Collective SMP

116. An SMP position in a Relevant Market can be held by a single Provider or jointly by two or more Providers.

117. In assessing Collective SMP, TRA will examine whether, even in the absence of structural or other links between the Providers involved, they operate with coordinated effects.

118. TRA’s Collective SMP test will examine whether the structural characteristics of the Relevant Market encourage parallel or aligned anti-competitive behaviour. The structure of the market in question and prospective/future Collective SMP will be important in this examination.

119. TRA notes that a Relevant Market characterised by many market participants is less likely to give rise to Collective SMP concerns. Accordingly, TRA will analyse the degree of market concentration at the outset to determine whether it is at such a level as to preclude automatically the existence of a Collective SMP position.

120. A high market share divided amongst two or more participants in the relevant market will not of itself point conclusively to the existence of Collective SMP. When investigating the ability and incentive of Providers to collude, TRA will take certain additional market characteristics and factors into account. The investigation will focus on whether each member of the alleged Collective SMP group, as it becomes aware of common interests, would consider it possible, economically rational, and hence profitable, to adopt on a lasting basis a course of action in the market aimed at selling at above competitive prices, without having to enter into an agreement or resort to a concerted practice and without any actual or potential competitors, let alone customers or consumers, being able to react effectively.

121. Each member of the Collective SMP group must have the ability to know, sufficiently precisely and quickly, how the members are behaving in order to monitor whether or not they are adopting a common policy. It is not enough that such market transparency enables each member of the Collective SMP group to be aware that interdependent market conduct is profitable for all of them, but each member must also have a means of knowing whether the other Providers are adopting the same strategy and whether they are maintaining it. It is only through such monitoring behaviour that firms will know when to activate deterrent mechanisms. TRA considers that, in a relatively transparent market, it is easy for a Provider to follow the moves of its competitors and to adapt its own decisions accordingly.

122. In addition to an assessment of market concentration, TRA will have regard to the stability of market conditions, especially by reference to factors such as:

123. the maturity of the market; and

124. technological innovation.

125. TRA will examine the role of “facilitating factors” permitting competitors to co-ordinate their behaviour, including:

126. repeated interactions between firms, as such interactions facilitate market transparency and deterrent mechanisms;

127. transparency of the marketplace, particularly as regards pricing;

128. homogeneity of products/services;

129. existence of structural links between competitors;

130. existence of symmetries between competitors, particularly as regards: cost structures, financial resources, spare capacity, market share and sales symmetries, the purchasing power of customers.

131. Where TRA determines that a group of Providers have Collective SMP in a Relevant Market, the services that those Providers provide in that market shall be referred to as Designated Services.

4.4 Abuse of Market Position by Service Providers with Significant Market Power

132. Service Providers with Significant Market Power are prohibited from undertaking activities or actions or engaging in practices that constitute an abuse of their market power. The following types of actions and activities shall be considered an abuse of market power:

133. failure to supply essential facilities to a competitor within a reasonable time after a request and on reasonable terms and conditions, where the Service Provider with Significant Market Power has such facilities available;

134. failure to supply essential facilities and services to a competitor within a reasonable time after a request and on reasonable terms and conditions, when these facilities and services are provided on an exclusive basis, due to a de jure monopoly, by the Service Provider with Significant Market Power;

135. discrimination in the provision of access, interconnection or other services or facilities to other Service Providers except under circumstances that are objectively justified based on differences in supply conditions, including different costs or a shortage of available facilities or resources;

136. bundling of services, whereby the Service Provider requires, as a condition of supplying a service to a competitor, that the competitor acquire another service that it does not require; or the Service Provider offers the competitor more favourable terms or conditions that are not justified by cost differences if it acquires another service that it does not require;

137. pre-emptive acquisition or securing of scarce facilities or resources, including rights of way, required by another Service Provider for the operation of its business, with the effect of denying the use of the facilities or resources to the other Service Provider;

138. supplying competitive services at prices below long run average incremental costs or such other cost standard as is established by the TRA;

a. cross-subsidizing from one service to a competitive service with the objective of lessening competition, except where such cross subsidy is specifically approved by decision of the TRA or by the TRA’s approval of tariffs for relevant services;

b. failure to comply with the interconnection obligations of a Service Provider with Significant Market Power that are specified in the Interconnection Guidelines;

c. any of the following actions, where such actions have the effect of impeding or preventing the competitor’s entry into, or expansion in, a market:

i. price squeezing, by a Service Provider with Significant Market Power, of the margin of profit available to a competitor that requires wholesale services from the Service Provider with Significant Market Power, by increasing the prices for the wholesale services required by that competitor, or decreasing the prices of the retail services in markets where they compete, or both;

ii. requiring or inducing a supplier to refrain from selling to a competitor;

iii. adoption, by a Service Provider with Significant Market Power, of technical specifications for its networks or systems that prevent interoperability with a network or system of a competitor;

iv. failure, by a Service Provider with Significant Market Power, to make available to other Service Providers on a timely basis technical information about essential facilities, technical specifications or other commercially relevant information which is required by such other Service Providers to provide services; and

139. using information obtained from competitors, for purposes related to interconnection or supply of services by the Service Provider with Significant Market Power, to compete with such competitors;

140. any other action or activity engaged in by a Service Provider with Significant Market Power that the TRA determines in accordance with Article 30 of the Telecommunications Law to have the effect, or to be likely to have the effect, of materially restricting or distorting competition in a telecommunications market.

4.5 Abuse of Market Position by Service Providers with Collective Significant Market Power

141. No Service Provider shall engage in practices restricting or distorting competition in telecommunications markets, including the following:

142. arrangements between two or more Service Providers that directly or indirectly fix the prices, divide the market or other terms or conditions of service in telecommunications markets;

143. arrangements between two or more Service Providers that directly or indirectly determine which person will win a contract or business opportunity in a telecommunications market; and

144. arrangements between two or more Service Providers to apportion, share or allocate telecommunications markets among themselves or other Service Providers.

5 Regulations to be Applied to Providers with SMP

5.1 Principles of Regulating Providers with SMP

145. To be eligible for ex-ante regulation Relevant Markets must be:

146. characterised by high and non-transitory entry barriers;

147. the emergence of effective competition must not be foreseeable, and the application of ex-post controls must be insufficient to address the market failures concerned. The latter includes situations where the compliance requirements of an intervention to redress a market failure are extensive, where frequent and/or timely intervention is indispensable, or where creating legal certainty is of paramount concern;

148. the identification of a Relevant Market as lacking effective competition does not necessarily imply that regulatory remedies will be applied to that market.

149. TRA will develop regulations including but not limited to licence conditions, price controls, universal service, and quality of service requirements, to ensure that a Provider with SMP may not abuse that market power.

150. When imposing ex-ante regulation there may be cases where TRA cannot observe anti-competitive behaviour, but anticipates the appearance of a particular competition problem based on the incentives of an SMP Provider to engage in such behaviour. Three types of situations may be identified:

151. Markets with the characteristics of natural monopolies (significant economies of scale and/or scope at the relevant level of output) where significant barriers to entry exist, where competition is unlikely to emerge. Here TRA must prospectively address directly the adverse effects of market power which are likely to prevail, such as excessive pricing, price discrimination, lack of investment, inefficiencies and low quality.

152. In markets where there are no significant economies of scale or scope or other barriers to entry exogenous to firms’ behaviour or regulatory decisions, SMP positions are likely to result from barriers to entry deriving from the behaviour of the incumbent, such as vertical or horizontal leveraging and market foreclosure. Here, TRA must prevent such behaviour in order to promote market entry and enable competition to develop.

153. Markets where incumbents benefit from first mover advantages, allowing them to retain a large share of customers and/or to charge premium prices even after market entry. Here TRA will have to deal with similar problems as in the case of natural monopoly with high barriers to entry, i.e., excessive pricing, price discrimination, inefficiencies, etc., until effective competition has emerged.

154. When imposing a regulation, TRA will demonstrate it is appropriate to address the underlying competition problem, proportionate and justified in the light of the basic regulatory objectives of promoting competition, contributing to the development of the internal market and promoting the interests of Lebanese citizens. These requirements are summarised in the following principles:

155. The regulation selected must be based on the nature of the problem as identified in the market analysis procedure.

156. Where infrastructure competition is not likely to be feasible, due to the persistent presence of significant economies of scale or scope or other entry restrictions, TRA will act to ensure sufficient access on acceptable terms to wholesale inputs in order to secure maximum consumer benefits, and will protect against any potential behavioural abuses.

157. Where replication of the infrastructure of the party with SMP is known to be feasible, regulation should assist in the transition process to a sustainable competitive market. TRA will continue monitoring the situation, while being aware of the possibility of inefficient investment.

158. TRA will produce reasoned decisions in a transparent manner respecting the principle of proportionality. Such decisions should include assessment of alternative regulations (if available) so that the least burdensome effective remedy can be selected.

159. Regulations will be designed to be incentive compatible. TRA will, wherever possible, formulate regulations in such a way that the advantages to the regulated party of compliance outweigh the benefits of evasion.

160. TRA will consider how best to regulate emerging markets. As a general principle, emerging markets should not be subject to ex-ante regulation but should be allowed to develop according to the normal dynamics of market forces. However, where large Providers use existing infrastructure to deliver new services in an emerging market, TRA may need to consider how to grant and maintain access to new entrants to non-replicable network elements on equivalent terms. Defining the evolution of an emerging market into a mature market will depend on the context.

161. To achieve Universal Provision, TRA may impose obligations on Providers with SMP in wholesale and retail markets. Universal Provision Obligations include:

162. a transparency obligation making public specified information (accounting information, technical specification, network characteristics, prices etc.);

163. a non-discrimination obligation to apply equivalent conditions in equivalent circumstances, and not to discriminate in favour of the regulated firm’s own subsidiaries or partners;

164. an accounting separation obligation to make transparent the internal transfer prices to the regulated firm’s own downstream operation in order to ensure compliance with a non-discrimination obligation or to prevent unfair cross-subsidies;

165. an access obligation that consists of obligations to meet reasonable requests for access or interconnection or use specific network elements. These may include a range of obligations, including an obligation to negotiate in good faith over terms and conditions of providing access;

166. a price control and cost accounting obligation, which can require Providers to set cost-oriented access charges or the imposition of a price control on the regulated firm. This is restricted to cases where the market analysis suggests that otherwise access charges might be sustained at an excessively high level, or where the firm might engage in a margin squeeze to the detriment of consumers.

5.2 Obligations to Provide Wholesale Services

167. Providers with SMP will be obliged to deal fairly and responsively with other Providers. (See Interconnection Guidelines).

168. Further, Providers with SMP may be obliged to offer pro-competitive wholesale services to other Providers to be determined by affirmative Decision of the TRA at the appropriate time; such matter may address Carrier Selection, Carrier pre-Selection, Number Portability, and Unbundled Services.

5.3 Obligations to Provide Retail Services

169. Interventions in wholesale markets are preferable to interventions in retail markets. If measures taken at the wholesale level do not resolve problems in the market, then Retail Obligations can be applied. Generally, regulatory controls on retail services will only be imposed where TRA considers that relevant wholesale measures would fail to achieve the objective of ensuring effective competition.

170. Given it is only appropriate to impose Retails Obligations on Providers where obligations at the wholesale level are not effective there is a danger that, even where wholesale controls may be ultimately effective, such controls may take a prolonged period of time to take effect. In the meantime and in the interest of consumer welfare, it may be necessary to impose Retail Obligations on Providers.

171. Retail Obligations on Providers may include but will not to limited to not:

172. charging excessive retail prices;

173. inhibiting market entry or restrict competition by setting predatory prices;

174. showing undue preference to specific end-users;

175. unreasonably bundling retail services.

176. TRA may apply to such Providers appropriate retail price cap measures, measures to control individual tariffs, or measures to orient tariffs towards costs or prices in comparable markets, in order to protect end-user interests whilst promoting effective competition. Where price controls are being put in place at a retail level the necessary and appropriate cost accounting systems must be implemented, following the format and accounting methodology specified by TRA to ensure compliance.

177. A qualified independent body must verify compliance with the cost accounting system, which can be the TRA so long as it has the necessary qualified staff.

178. A statement concerning compliance shall be published by each controlled Provider each year.

5.4 Monitoring, Compliance and Penalties

179. TRA shall monitor Service Providers’ compliance with SMP Guidelines.

180. TRA shall issue decisions requiring Service Providers with Significant Market Power to comply with the Telecommunications Law, the present Guidelines, and all other regulations issued.

181. TRA shall monitor and prevent abuses of Market Position of Service Providers with Significant Market Power;

182. TRA shall monitor and prevent practices that may restrict competition;

183. TRA shall review any transaction or transactional relationship (e.g., interconnection), particularly those involving Service Providers with Significant Market Power, to ensure that they will not restrict, undermine or distort competition; and,

184. TRA shall take all necessary measures, whether preventive (i.e., before abuse of Significant Market Power) or remedial (i.e., after abuse of Significant Market Position), to protect competition and ensure a sustainable competitive market.

185. TRA may impose all penalties and remedies allowed by the Telecommunications Law, including structural remedies, on Service Providers with Significant Market Power for non-compliance with the Telecommunications Regulations and the SMP Guidelines.

[1] See the 1997 WTO Agreement on Basic Telecommunications Services.

[2] Telecommunications Law (Law 431 of July 22, 2002) Article 5 (j)(g)

[4] a market test to define a Relevant Market in a defined geographical area such that a hypothetical profit-maximizing firm, not subject to price regulation, that was the only present and future producer or seller of products for the Relevant Market in that area could impose at least a Small but Significant and Non-transitory Increase in Price (SSNIP), assuming the terms of sale of all other products are held constant. The test is repeated until the market boundary is set. A Relevant Market is a group of products sold in a geographic area that is no bigger than necessary to satisfy this test.

[5] In the communications sector, these costs might be represented by important investments in technology, prohibitively high costs of switching terminals or long-term contracts.