Unfair competition complaint against Chung Hwa Telecommunication Co., Ltd. regarding its "099" services.
Case:
Unfair competition complaint against Chung Hwa Telecommunication Co., Ltd. regarding its "099" services.
Key Words:
average pricing, network interconnection, intelligent network
Reference:
Fair Trade Commission Decision of October 13, 1999 (the 414th Commissioners' Meeting).
Industry:
Telecommunications (6320)
Relevant Laws:
Article 10(1)(iv) of the Fair Trade Law
Summary:
1. A private telecommunications company wrote a letter of complaint stating that Chung Hwa Telecommunication Co., Ltd. ("CHT") set, through its "099 Convenience Number" services, a uniform rate of NT$.06 per second for both local-099-local calls and local-099-mobile phone calls. By doing so, CHT increased the rate for local calls by a factor of nine from the original rate of NT$1.7 per five minutes and decreased the rate for local calls to mobile phones by 40 percent from the original rate of NT$6 per minute. It was alleged that CHT used the revenue generated from its monopoly business to subsidize its business that had been opened to competition by other privatized sectors. 2. CHT introduced its "099" services on 7 September, 1999. This services combines existing telecommunications and computer technologies by connecting intelligent nodes deployed on the telephone network to provide users with exclusive numbers. Users use their exclusive number to make collect calls, manage information, and check voice mail. Users can also create an answering and transfer program. Information telephoned to the user may be transferred to the designated user's terminal equipment (e.g. telephone, mobile telephone, or fax machine) in accordance to with the transfer program set by the user. Before CHT introduced the "099" services, it submitted a rate proposal to the Ministry of Transportation and Communications and the Ministry of Economic Affairs for approval. The Ministry of Transportation and Communications, however, instructed the Directorate General of Telecommunications to change the approved rate to a "provisional; experimental rate" with a provisional testing period of two months because the Ministry had discovered a number of issues regarding the rate proposal. These issues included the question of who has the right to set rates, whether there may be two phases in the rate, whether or not cross-subsidization had occurred, and whether discussions should be held with other competitors when future rate increases directly affect other competitors. 3. CHT structured the pricing of its "099" services such that it may have obstructed fair competition in the following aspects: (1) 'Average pricing' involves the issue of unfair competition. CHT's "099" services charged NT$.06 per second (NT$3.6 per minute) to transfer local calls to local telephones or mobile phones. The current local calling rate is NT$1.7 per five minutes while the local calling rate to a mobile phone is NT$6 per minute. Consequently, CHT may be collecting a premium on local calls with its "099" services and using this premium to subsidize shortfalls from calls to mobile phones. As fixed line business has not been liberalized yet, CHT continues to enjoy a monopoly on local calling. On the other hand, mobile services has been liberalized. Given this situation, CHT's "099" services impacts fair competition in the mobile telephone industry by setting rates through the average pricing described above. (2) Violation of rate-setting right and the issue of allocation of telecommunications fees. Article 14 of the Regulations Governing Mobile Telecommunications Network Interconnection provides that "Allocation of telecommunication fees for telecommunication between mobile networks and fixed line networks, apart from international telecommunications, shall be processed in accordance with the following principles: ...(2) the carrier on the calling end shall collect the telecommunication fee from the caller; telecommunication fee revenue belongs to the mobile network carrier." This Article intends that fixed line networks are to function as "access networks" in the present regulatory environment. These networks provide access to higher-end services including long distance, international, and mobile telephony. Moreover, since local calling remains a monopoly, the purpose of opening the market to competition will be defeated if the monopoly carrier is allowed to set rates for local-to-mobile calls (3) Issue of equal access to "099" services. Presently, CHT's "099" can only connect to CHT's local and mobile phone networks. Non-CHT mobile subscribers cannot transfer incoming local calls to their mobile phone through "099". This may cause subscribers to switch to CHT from private carriers in order to access the "099" services. 4. The Fair Trade Commission ("the Commission") has always been positive to carriers' introduction of new telecommunications technologies and new telecommunications services. Nonetheless while mobile telephony has been opened to competition, fixed line telecommunications are still operated by CHT on a monopoly basis. In this half-open industry structure, special vigilance must be exercised against a carrier with multiple networks using its monopoly to subsidize operations in open sectors and thereby extend its market clout improperly and other anti-competitive conditions to emerge. To maintain fair, orderly competition in the telecommunications market, the Commission makes the following recommendations to the competent authority of telecommunications industry, the Ministry of Transportation and Communication: (1) CHT's "099" services may have the effect of obstructing fair competition by collecting telecommunications fees for local calls and local calls to mobile telephones on an average pricing basis. The Commission recommends 'de-averaging': CHT should collect fees on the basis of its actual costs. (2) When CHT connects "099" calls to the mobile telecommunications network, the mobile phone carrier should have the right to set and collect the telecommunications fee in accordance with the relevant laws and regulations so as to maintain competition in the mobile telephone business. (3) CHT should provide equal access to its "099" services to subscribers to other private mobile telephone carriers and avoid obstructing fair market competition by means of unequal treatment without legitimate reason. Appendix: CHT Telecommunication Co., Ltd.'s Uniform Invoice Number: 96979933 Summarized by Liao Hsien-chou; Supervised by Ch'en Hui-p'ing