LEGAL & REGULATORY MATTERS ANTITRUST ISSUES IN A SUBMARINE CABLE CONSORTIUM By Andrés Fígoli
W
henever there is a new submarine cable consortium project, the legal and regulatory analysis is initiated by the prospective landing parties to determine what antitrust requirements should be complied with. Each cable owner, whether a landing party or not, should conduct an independent legal analysis to assess the antitrust requirements. This analysis should be conducted in their own country and in those jurisdictions where they intend to operate. Antitrust laws and regulations vary from jurisdiction to another, so it’s important to understand the specific rules that apply. Such evaluation is important to know in advance the regulatory roadmap for the installation of a new subsea cable and to be able to negotiate any pre-sales IRU agreements with special legal conditions to generate additional revenues. The way forward is not easy, as any infringement of antitrust rules is generally subject to penalties linked to the net profits of the companies involved. Accordingly, to compete effectively in any given market, each consortium member knows that it must successfully design and market its own capacity services, while maintaining the consortium infrastructure in good working order, and anticipating and responding to various competitive factors affecting all landing country markets and customers. Challenges range from pricing strategies against other new consortium competitors in the area, changes in consumer preferences, emerging technologies, and economic and social
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conditions in each landing country over the 25-year life of the cable.
MARKET SHARE
Consortium members should first define the relevant geographic markets in which they already operate and those in which they intend to operate. In the context of a submarine cable project, these markets would typically include the countries where the new subsea system will land. If a consortium co-owner is found to have significant market power, it may be subject to stricter antitrust scrutiny. Antitrust authorities are more likely to investigate and review the conduct of companies with significant market power to ensure that they do not abuse that power to harm competition. In order to calculate the market share of a telecommunications company, each national regulation determines how this should be done. In general, it is necessary to know the total revenue or number of subscribers of that company and the total revenue or number of subscribers of the international connectivity market. Once the market share has been calculated, it is often up to the antitrust or regulatory authorities in that jurisdiction to determine whether the cable owner is a dominant operator. However, market dominance as such is not illegal. What is generally illegal under the relevant legal framework is the abuse of dominance - a practice that occurs when a company uses its dominant position to exercise market power, thereby distorting and/or restricting competition. Actions to take before laying cables
Addressing potential antitrust issues before laying submarine cables is a proactive approach that can help consortium members avoid legal challenges, penalties, and reputational damage. If a consortium member, whether an OTT or a telecommunication company, has an affiliate in a landing country and plans to sell capacity with an interconnection point in that nation, then it is imperative to assess whether there are any potential antitrust issues that need to be addressed before these two actions take place, rather than after, when it may come under the regulatory spotlight. The real concern of any antitrust authority is to identify which entity, despite the complex corporate and contractual arrangements in a construction and maintenance agreement (C&MA), can effectively distort competition in its markets, so it is better not to be on the suspect list in the first place. It is therefore essential that each cable owner considers this with an antitrust counsel in accordance with its own regulatory situation in the landing country. For example, a new telecommunications company with no previous presence in that nation may not have the same regulatory requirements as a consortium member that already has subsidiaries in that country with mobile, satellite or even other submarine infrastructure providing services to local customers. In addition, if the latter has previously been sanctioned by the antitrust authority for anti-competitive behavior, all the other co-owners should take certain additional precautions to avoid being considered a cartel. Accordingly, the consortium parties should engage anti-