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5.1.1. Market shares

The market shares in the market for the supply of wholesale network infrastructure access (physical) at a fixed location are as follows:

127_{Moreover, the international comparisons of prices shows that Portugal is well positioned with regard to the installation price} and the monthly fee of the local loop, in terms of full access and shared access.

Table 26 – Evolution of market shares

2005 2006 2007

Grupo PT 70% 67% 64%

ZON Multimédia 23% 24% 26%

Sonaecom (with Oni and Tele2) 0% 0% 0%

Cabovisão 6% 6% 7%

Vodafone 0% 0% 0%

Others 1% 2% 2%

In this case, and according to Annex 1, account must be taken of all alternative infrastructures to the PSTN capable of providing FTS and broadband, with consideration of the domestic supply.

Furthermore, if the market were defined as being only the actual supply of wholesale unbundled access to the local loop (i.e., without regard to internal supply), PTC would have 100% market share, whatever geographic market definition is used, since it is the only company, albeit through regulatory imposition, providing access to third parties.

In any case, Grupo PT, which has the largest market share, has a market share exceeding 40% - the threshold that has been used in past decisions of the EC as the value above which it could be considered that there are concerns with respect to situations of dominance.

5.1.2. Barriers to entry and expansion

With respect to the analysis of barriers to entry and expansion examination should be made of the existence of sunk costs and significant economies of scale and / or economies of scope. However, once present in a given market with sunk costs having already been incurred, these become irrelevant in the analysis of entry barriers and may even be considered as a barrier to market exit.

Sunk costs

Most operators which provide retail broadband and narrowband access services, including ZON Multimédia in part of this market, have already invested in capacity for the provision of these services, already incurring, for this purpose, sunk costs. Therefore, in general these operators are able to expand their activities to other customers without incurring additional significant sunk costs.

Economies of scale and scope

The costs associated with the development and expansion of narrowband and broadband services are subject to significant economies of scale.

As far as economies of scope are concerned, it appears that the majority of operators in this market provide a variety of services: telephone service, television over IP, "Video on demand" and other added value services.

Given the characteristics of this market there may be some appeal for the entry of operators investing in their own infrastructure, particularly if there is easy access to infrastructure (including conduits).

Additionally, the main operators in this market seem to have equal access to financial resources / capital markets, whereby no situation has been found where one operator has an advantage over the others.

5.1.3. Vertical integration

As already mentioned, the existence of vertically integrated companies may place non- integrated competitors at a competitive disadvantage, since market power may be leveraged from one market to another, especially when the integrated competitor provides the non- integrated competitor with a component of production or essential intermediate consumption. In these circumstances, it becomes more difficult for a non-integrated company to respond to increased demand occurring as a result of an increase in the prices a competitor.

With respect to this market, it is noted that Grupo PT consists of vertically integrated undertakings, present in both the wholesale and retail markets. Therefore, if one of these companies has SMP in an upstream market, it has the opportunity to transfer market power to the downstream markets, thereby affecting competition. In particular, if there is difficulty in securing inputs from the wholesale market or in obtaining these inputs at a competitive price, this may further increase the barriers to entry at retail level.

Accordingly, this criterion does not contradict the presumption of dominance that results from the calculation of market share.

5.1.4. Price trends and pricing behaviour

The retail pricing policy and its evolution over time can be a good indicator of the degree of competition in the market.

With respect to wholesale prices, it is shown that the only existing wholesale deals which are relevant in practice (the offer of access to conduits and the OLL) have seen their prices cut only as a result of regulatory intervention.

This is not indicative of a competitive market.

5.1.5. International Benchmarking

With respect to the OLL, as mentioned above, prices have been reduced on the initiative of ICP-ANACOM.

As a result of this initiative, installation prices and the monthly fees for the local loop are below the EU average.

Graph 14 – Comparison of installation prices (left graph) and monthly fees (right graph) for full access with respect to the EU 15 - € 20 € 40 € 60 € 80 € 100 € 120 € 140 € NL ES AT DE PT EL IT DK FR UK IE LU SE BE FI - € 2 € 4 € 6 € 8 € 10 € 12 € 14 € 16 € 18 € IT NL EL SE PT FR BE ES DK UK FI AT DE LU IE

Graph 15 – Comparison of installation prices (left graph) and monthly fees (right graph) for shared access with respect to the EU 15 - € 10 € 20 € 30 € 40 € 50 € 60 € 70 € 80 € 90 € NL AT ES BE PT DK DE EL UK IE IT SE FR LU FI - € 1 € 2 € 3 € 4 € 5 € 6 € 7 € 8 € 9 € NL BE FR EL UK DE IT PT ES LU SE DK AT FI IE

Because these prices are imposed through regulatory intervention, this criterion is not relevant to the assessment of SMP.

5.1.6. Evidence of previous anti competitive behaviour

As stated above, in the analysis made in 2005, ICP-ANACOM concluded that the companies of Grupo PT had strategic control over the conditions governing the supply of retail services. The obligations imposed at the wholesale level and the interventions enacted were designed to reduce the incentives for anti-competitive behaviour.

There is also record of the existence of anti-competitive behaviour, sanctioned by the AdC, particularly with regard to access to conduits.

5.1.7. Countervailing negotiating power

In this market, as noted, the interventions aimed at improving the wholesale deals have been at the initiative of ICP-ANACOM, which demonstrates that customers of these offers have limited negotiating power.

5.1.8.

Potential competition

It is only in areas of high population density and business activity that there might be some potential competition, particularly with the investment by OSPs that is envisaged in respect of NGN and with the possibility of NGNs becoming open networks.