Telefónica Fine for Anti-competitve Broadband Upheld

Spanish telecom operator Telefónica has lost its latest bid to avoid a €152 million (US$211 million) fine for blocking competition in Spain's broadband market.

The European Commission imposed the fine in 2007 when it found the company guilty of margin squeeze and on Thursday Europe's second highest court rejected Telefónica's attempts to have the decision overturned.

A margin squeeze occurs when a dominant company makes it impossible for competitors to make a profit. Between 2001 and 2006, Telefónica's wholesale prices charged to competitors to use its nationwide fixed telephone network (the only one in the country) was such that they could not compete with the retail prices Telefónica charged its customers.

The result was Spanish consumers paying 20 percent more than the European average for their broadband connection due to the lack of competition, something the European Commission takes very seriously in its antitrust rules.

However, Telefónica says it was acting in accordance with Spain's national telecommunications regulator and the Spanish state backed it up, saying that the Commission had upset the balance between national regulation and E.U. regulation.

The Commission says that Telefónica knew it was indulging in margin squeeze and that the estimates made by the Spanish regulator were not matched by its own business plan.

Telefónica says it will appeal Thursday's ruling to the European General Court.

Follow Jennifer on Twitter at @BrusselsGeek or email tips and comments to jennifer_baker@idg.com.

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