Case Study

Example: Portugal

This case study illustrates how recommendations, as a legal faculty, can be used in conjunction with other advocacy instruments to improve competition in the Portuguese Telecommunications market.

Telecommunication Sector

In Portugal, the telecom sector was for decades entrusted to one company – the publicly owned Portugal Telecom Group (PTG). Subsequently, a privatized PTG took over the set of rights and obligations of the concessionaire of the telecommunications public service. As a result of liberalisation, the provision of telecom services was ensured by several private operators, including the incumbent, but, after three years of market liberalization, in terms of market share, PTG still accounted for some 90% in fixed line business and some 45% in mobile. Regardless of the new liberalised context, the incumbent, kept contracts for telecom services and products with the Public Administration since the time it was a public monopoly. The new operators complained they did not have a chance to compete in such a market, because no public services were being subject to tender. Indeed, such contracts were spread over a large number of distinct costumers and, as a result, contract values were often below the minimum threshold required for competitive tendering by the public procurement law. Overall, in 2003, PTG supplied more than 80% of the Public Administration requirements in this sector.

Accordingly, the main goal of the advocacy efforts undertaken by the Portuguese Competition Authority aimed to create conditions for more effective competition between operators by improving opportunities of tendering for telecom services and products purchased by the Public Administration. Concrete measures included: mandatory tenders for any acquisition of telecom services and products; forbidding automatic renewal of existing contracts; and periodic obligation (3 years) to open tenders for the provision of telecom services and products. The Competition Authority used a number of advocacy tools to convince regulators.

Outreach efforts were pursued towards increasing awareness of policy and opinion makers as well as consumers at large. However, the main instrument used by the Competition Authority was a Recommendation put forward to the Government. It is important to notice that the advocacy instrument used was actually an institutional tool. The Recommendation is a legal faculty, entrusted by law to the Competition Authority. However, this instrument per se is not mandatory, hence the need to articulate it with an appropriate dissemination effort.

Essentially, the Recommendation instrument allows the Authority to present to the Government and to other public institutions measures – mainly legislative ones - to boost competition. The Telecom Recommendation was informally presented, first hand, to the Minister of Finance and Public Administration, in order to make her aware of the potential savings for the public budget. The Minister is also responsible for public procurement legislation at large, and specifically for the legislation affecting the purchase of telecom services. The success of the instrument used depends, largely, on its acceptance by the Government.

In this case, the role of the central Government was critical since it was simultaneously responsible for adjustments in sector regulation as well as a major consumer of telecom services and products. In addition, contacts were held with local governments who are also major consumers of telecom services and are subjected to public tendering regulation. Thus, direct contacts between the Authority and the Minister of Finance and Public Administration, as well as the municipalities, were instrumental in the advocacy process.

In support of the importance of a new regulatory framework, the Authority studied the market structure, the demand, and the amount and type of telecom contracts generated by the Public Administration. Furthermore, it studied some foreign experiences, both for benchmarking and for the search of best practices in regulatory reform.

Finally, a major dissemination effort of the contents of the Recommendation was carried out through the Media, including press and television. Simultaneously, the Competition Authority formally published the Recommendation on its website.  The Competition Authority publicized extensively the goals of the Recommendation before and after its enactment. This effort was instrumental in sensitizing consumers, including the Public Administration, to benefits of the market opening. In general, the news and opinion columns in the Media were very supportive of the Authority’s position.

There were several concrete changes in the regulatory framework due to the advocacy work performed by the Portuguese Competition Authority. The results vis-à-vis the main objective of the advocacy efforts were exceptional. The Government followed all the measures in the Recommendation and the new framework can, effectively, endorse more competition. A new decree-law with revised rules for public tendering was approved. This decree-law accepted the main recommendations of the Authority and it drastically changed the framework for all public procurement of telecom services; the provision of telecom services has to be subjected to a competitive tendering and contracts awarded for periods of up to three years. A minimum of three proposals is to be requested from market operators. These contracts are, thus, periodically subjected to contestability. Additional measures were also ensured against potential discrimination of small operators.