Authors: Monika Plum, Dr. Cara Schwarz-Schilling
Summary
The telecommunications sector and the postal sector are subject to sector specific regulation in addition to antitrust legislation. The telecommunications law and the postal law and several ordinances form the legal body for this regulation. According to both laws crucial regulatory instruments (e.g. rate regulation) apply to firms holding a dominant position in the sense of the German cartel law. Identification of a dominant position requires as a first step delineation of markets in the product markets as well as their geographic extension. Therefore delineation of markets in the telecommunications as well as the postal sector plays an important role in applying these laws.
In this discussion paper a specific concept of market delineation is suggested and applied to the telecommunications and postal sector. In competition theory and antitrust policy the concept of the hypothetical monopolist has gained importance as a means to determine demand and supply substitution. It is guided by the question whether competitive forces are at work or whether market power can be identified. The concept making use of a thought experiment has first been suggested in the 1984 Merger Guidelines of the US Department of Justice and is now widely used also by the European Commission and Oftel. A crucial advantage of the concept is that the aim of delineation, namely the detection of abuse of market power is implicit in its definition. The thought experiment can be used to investigate the functioning of demand and supply substitution. Substitutes are taken to be within the relevant market, if they effectively prevent the abuse of market power.
The legislative rules in the telecommunications and postal sector requiring market delineation are described. An overview is given about the most important criteria and quality dimension relevant for market delineation of telecommunications services and postal services. As an example voice telephony in the telecommunication sector and letter conveyance services in the postal sector respectively are analysed.
It remains to be stressed that market delineation can only be done on a case by case basis because the starting point (e.g. for which products should the market be delineated) as well as the main issues of the case (e.g. abuse or merger) are crucial. Furthermore it has to be considered that in dynamic industries market delineation can change over time. This can particularly be expected in a transition phase from monopoly to competition giving rise to changes in market structure.
Only German language version available.
