Chunghwa Telecom Corporation and Taiwan Cellular Corporation were complained for abusing their advantageous positions in the mobile telephone market to restrict competition in the international network market

Chinese Taipei

Chunghwa Telecom Corporation and Taiwan Cellular Corporation were complained for abusing their advantageous positions in the mobile telephone market to restrict competition in the international network market

Key Words:

fixed-line telecommunications, mobile telecommunications

Reference:

Fair Trade Commission Decision of January 9, 2003 (the 583rd Commissioners' Meeting); Letter (92) Kung Yi Tzu No. 0920000405

Industry:

Telecommunications (6000)

Relevant Law:

Article 10(1)(i) of the Fair Trade Law

Summary:

1. Eastern Broadband Telecom Corporation (Eastern Broadband) claimed that Chunghwa Telecom Corporation (Chunghwa) and Taiwan Cellular Corporation (Taiwan Cellular) were abusing their advantageous positions in the mobile telephone market, thereby restricting competition in the international network market, in violation of the Fair Trade Law. Eastern Broadband stated that it is a full-license fixed-line network operator, with local network, long-distance network, international network and value-added telecommunications businesses. To benefit consumers using mobile phones to dial its "005 international calls," Eastern Broadband subsequently advanced its "Mobile Phone Dial 005 Promotion." According to the Administrative Rules for Network Interconnection Between Type I Telecommunications Carriers, the Regulations Governing Mobile Telecommunications Businesses and the Standards for Network Interconnection Contracts Between Telecommunications Enterprises, Chunghwa, Taiwan Cellular and other mobile telecommunications enterprises have an obligation to cooperate in the execution of international long-distance promotions. Chunghwa and Taiwan Cellular, however, refused to cooperate for the above-mentioned international long-distance promotion by: (i) the reason that their systems are under upgrading construction, and (ii) charging additional accounting handling fees, which are deemed as unreasonable by Eastern Broadband. As Chunghwa concurrently operates international long-distance business, as does Taiwan Cellular's affiliated enterprise, Taiwan Fixed Network Corporation (Taiwan Fixed Network), Eastern Broadband believed the two parties were abusing their advantageous positions in the mobile telecommunications market to block other telecommunications enterprises from offering promotional international access rates, thereby restricting competition in the fixed-line telecommunications market, in violation of the Fair Trade Law.

2. An inquiry by the Fair Trade Commission (the FTC) found that Chunghwa is a Type I telecommunications carrier with a full-license for fixed-line business and a mobile telecommunications license, concurrently operating local network, long-distance network, international long-distance and other fixed-line and mobile telecommunications network services. Prior to the liberalization of the telecommunications industry, Chunghwa was the sole domestic telecommunications carrier. Following liberalization of the market, Chunghwa remained a fairly dominant force in the market for a number of telecommunications services. Taiwan Cellular is the nation's number two mobile telecommunications carrier in terms of subscribers, and its affiliated enterprise, Taiwan Fixed Network, is a full-license fixed-line operator, providing local, long-distance and international long-distance telecommunications network services. Chunghwa and Taiwan Cellular respectively account for 29% and 25% of local mobile phone subscribers. When fixed-line operators provide international long-distance services to mobile phone users, they must use the mobile telephone network of a given end user's mobile telecommunications carrier and purchase call origination access from said carrier. According to the provisions of Article 20 of the Administrative Rules for Network Interconnection Between Type I Telecommunications Carriers: "When using mobile telecommunications networks for international telecommunications, international telecommunications fees shall be collected by the mobile telecommunications network enterprise from the calling party in accordance with the rate set by the international telecommunications services carrier and all revenue from said international telecommunications fees shall be turned over to the telecommunications enterprise operating international telecommunications services." Thus, international telecommunications network carriers must either have said itemized fees collected on their behalf by the mobile telecommunications provider or purchase "bill collection services" from the mobile telecommunications provider. With regard to this case, the mobile operators providing services for international telecommunications network carriers with "call origination access" and "bill collection services" do not within the same market, with each individual operator and customer base constituting its own particular market. In other words, Chunghwa and Taiwan Cellular meet the definition of the term "monopoly" as provided in Article 5 of the Fair Trade Law with respect to the aforementioned relevant market.

3. During 2001, Chunghwa and Taiwan Cellular cooperated with Eastern Broadband on a number of international calling plans. The two companies subsequently notified Eastern Broadband that they would not be able to cooperate in the execution of an international calling promotion due to the two companies' then-current upgrade of their billing system and the failure to reach an agreement on "billing system correction fees" and "supplementary customer service costs." The competent authority for telecommunications (the Directorate General of Telecommunications, Ministry of Transportation and Communications) considers "billing system correction fees" and "supplementary customer service costs" as network interconnection "support costs" that should be borne by the party requesting for network interconnection and thereby raising the costs of the other party. The FTC's investigation found no evidence sufficient to prove that Chunghwa and Taiwan Cellular acted with intent to delay the progress of negotiations regarding the "billing system correction fees" and "supplementary customer service costs," to delay the timetable for the upgrading of their mobile telecommunications accounting systems or to reach an agreement in order to block Eastern Broadband's international calling promotion. Consequently, the FTC finds it difficult to believe that the acts of Chunghwa and Taiwan Cellular constituted a violation of the prohibition against the use of "… unfair methods to directly or indirectly prevent other enterprises from competing" contained in the provisions of Article 10(1)(i) of the Fair Trade Law.

4. To preserve competition in the international network services market, the FTC issued a warning to Chunghwa and Taiwan Cellular to offer immediate cooperation with fixed-line telecommunications businesses in the execution of international dialing promotions, advising that care should be taken to avoid, without appropriate reason, the refusal, delay or discriminatory handling of requests by fixed-line telecommunications businesses for cooperation in the execution of international dialing promotions; while ordering that agreement regarding "billing system correction fees" and "supplementary customer service costs" be reached with Eastern Broadband within three months. The FTC also ruled that collection of said fees and costs is fair, reasonable and conforming to the principle of non-discriminatory treatment. Additionally, the FTC ruled that said costs and fees should have a reasonable correlation with actual costs and that practices involving the intentional padding of the costs of a competitor's international dialing promotion to lock out competition in international dialing rates must be particularly avoided.

Appendix:
Eastern Broadband Telecom Corp.’s Uniform Invoice Number: 70771579
Chunghwa Telecom Corp.’s Uniform Invoice Number: 96979933
Taiwan Cellular Corp.’s Uniform Invoice Number: 97176270

Summarized by Liao, Hsien-Chou; Supervised by Hou, Wen-Hsien