Competition Switzerland - Q 1 2011

Author:Mr Silvio Venturi and Pascal Favre
Profession:Tavernier Tschanz
 
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Investigations

Commission investigates into cooperations in the fiber-optic sector

On January 4 2011, the competition commission announced that it has launched a preliminary investigation into a cooperation agreement between Swisscom and the city of St Gallen to extend the city's fibre-optic network. The cooperation agreement was submitted to the commission, which now plans to examine the agreement in more detail amid concerns that it could reduce competition for broadband internet access. In recent months, the commission has received several notifications regarding similar cooperation in the fibre-optic sector.

The contemplated cooperation between the city of St Gallen and Swisscom provides for the construction of the fibre-optic network in that city. The intention is to lay many fibres in each area of use (ie, flats, houses and commercial premises), with the hope of guaranteeing effective competition by providing other operators with non-discriminatory access to the fibre-optic network (the so-called "multi-fibre optic model"). The agreement will guarantee Swisscom long-term access to up to two fibres per business and household. In return, Swisscom will assume around 60 % of the required investment costs as well as the maintenance and operating costs. Swisscom has claimed that the agreement will guarantee the construction of an open-access infrastructure and enable real competition while avoiding the need to lay parallel networks.

The investigation must ascertain whether the contemplated cooperation might lead to the creation of a monopoly for Swisscom in relation to the fiber-optic network in St. Gallen and, if so, whether remedies could be provided for the alternative operators – many of which are alarmed at Swisscom's rapid dominance of the fibre-optic sector in St. Gallen. Analysts estimate that Swisscom still holds a 55% share of the total broadband market in Switzerland, chiefly through its asymmetrical digital subscriber line offerings, while cable operators represent the largest portion of the competition, with a market share of just under 30%. However, while the fibre-optic sector is nascent and commands only a minor market share, Swisscom has dominated all investment and roll-out in this area.

Swiss competition law provides for a system of non-mandatory preliminary notification of potentially unlawful agreements and practices. Undertakings have the option formally to notify the commission of agreements or practices which may...

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