Judges D Gratsias (Rapporteur), M Ilešič, I Jarukaitis, Z Csehi
Advocate General P Pikamäe
The sole operator for the provision of universal services in Ireland in the Irish telecommunications market (“the provider”), requested funding for the net costs of its universal service obligations. The Commission for Communications Regulation, Ireland’s National Regulatory Authority, adopted the contested decisions by which it found that the net costs borne by the provider did not constitute an unfair burden on that undertaking and, consequently, it refused to order that the universal service obligations be shared among the various operators present in the market. Under article 12(1) of Parliament and Council Directive 2002/22/EC (“the Universal Service Directive”), where National Regulatory Authorities considered that the provision of universal services might represent an unfair burden on undertakings, they had to calculate the net costs of its provision. It was apparent from article 13 of the Directive that it was only on the basis of such a calculation that the authorities could find that an undertaking was in fact subject to an unfair burden. Hearing the provider’s appeal against the contested decisions, the High Court (Ireland) found that, in each of the contested decisions, the Regulatory Authority relied on an “Unfair Burden Report” prepared at its request by a firm of consultants. The consultants stated that, when drawing up the reports, it had not assessed whether the net cost of the universal service obligations borne by the provider had an impact on that undertaking’s ability to compete on equal terms with its competitors in the relevant market in the future. By the contested decisions, the Regulatory Authority took the view that there was no need to carry out a competitive distortion assessment. Both the reports and the contested decisions focused solely on the characteristics of the provider, since neither the Regulatory Authority nor the firm of consultants carried out an assessment of the position of the provider’s competitors in the market. In those circumstances, the High Court (Ireland) stayed the proceedings and referred to the Court of Justice of the European Union for a preliminary ruling the question, as re-phrased by the Court of Justice, whether articles 12 and 13 of the Universal Service Directive required the competent National Regulatory Authority, in order to determine whether the net cost of universal service obligations represented an unfair burden on a particular operator, to examine the characteristics particular to that operator, taking account of its situation relative to that of its competitors in the relevant market.
On the reference—
Held, according to decided authority, member states could not, without infringing their obligations under the Universal Service Directive, make a finding that the provision of universal services in fact constituted an unfair burden in respect of which compensation was payable, unless they had calculated the net cost which such provision represented for each undertaking responsible and had assessed whether that cost constituted an excessive burden for the undertaking concerned, nor could they adopt a compensation scheme in which the compensation was unrelated to that net cost. Any consideration of the provider’s market share implied that the process of determining whether the burden on that provider might be unjustified, had an integral comparative component which could not be disregarded by the Regulatory Authority. The mere finding of facts relating to the market share of that provider, considered in isolation, did not allow any useful conclusions to be drawn in the absence of a comparison with the market shares held by its competitors. Those conclusions might vary according to the number of competitors present in the market, the links which might exist between them, or even the different sectors of the relevant market in which those competitors were present. Therefore, the competent authority was required to take account of the situation of the universal service provider relative to that of its competitors in the relevant market. It followed that the assessment of the competitive situation in the relevant market was an integral part of the conditions for the application of articles 12 and 13 of the Universal Service Directive. Thus, by taking account of the situation of a universal service provider relative to that of its competitors, it was possible for the authority to determine whether the net cost of its obligations constituted, by reason of the resulting distortions of competition in the relevant market to the detriment of that provider, an unfair burden on the latter, within the meaning of articles 12 and 13 of the Directive. In accordance with Part A of Annex IV to the Directive, when calculating the net cost borne by the universal service provider, it was necessary to assess the costs that any undertaking would have chosen to avoid had there been no universal service obligations and it was in relation to the conclusions which it drew from that process that the authority had to take account of the situation of that provider relative to that of its competitors. In the context of that analysis, the authority had also to take account of the scope of a provider’s request for compensation and the evidence relied on by the provider seeking revision of the conditions for financing the net cost of the universal service obligations. Accordingly, articles 12 and 13 of the Universal Service Directive required the competent National Regulatory Authority to examine the characteristics particular to an operator entrusted with such obligations, taking account of its situation relative to that of its competitors in the relevant market, in order to determine whether the net cost of universal service obligations represented an unfair burden on that operator (judgment, paras 42–44, 47, 50, 52, 53, 54, operative part).
J Newman (SC) and J O’Connell (instructed by J Whelan, Solicitor) for the provider.
B Kennedy (SC) and D Dodd (instructed by A Brick and R Byrne, Solicitors) for the Commission for Communications Regulation, Ireland.
D Hardiman for Three Ireland Services (Hutchison) Ltd and Three Ireland (Hutchison) Ltd, notice parties.
J Očková, M Smolek and J Vláčil, agents, for the Czech Government.
G Braun, L Malferrari and J Samnadda, agents, for the European Commission.