EU slaps Telefonica with $206m fine for unfair Internet prices

EU regulators fined Spain's Telefonica 151.9 million euros ($206.5 million), claiming the company unfairly squeezed rivals by setting wholesale Internet prices too high to allow them turn a profit, an Associated Press report said.

EU Competition Commissioner Neelie Kroes said the high fine, second only in EU monopoly abuse penalties to the landmark 497 million euros ($613 million) fine on Microsoft, reflected the fact that Telefonica knew it was breaking EU antitrust rules, the Associated Press report said.

'Telefonica's price structures raised its competitors' costs, restricted competition on the retail market, and made consumers pay the price,' she told reporters, saying the decision was a warning to others in newly opened sectors, such as energy.

The company said it would appeal the EU decision it called 'unjustified and disproportionate,' and said it contradicted ongoing supervision from the Spanish telecom regulator, the report added.

It said this created legal uncertainty about which regulator was in charge, which would inevitably affect its ability to launch new products and services.

Spain's former national monopoly controls the fixed line telephone network used for 80% of all ADSL broadband Internet connections, the report said.

Rivals need to buy wholesale access from Telefonica to offer competing retail services, it added.

The European Commission said these wholesale prices on regional and national networks were set so high from 2001 to 2006 that they held back the rollout of broadband Internet in Spain, the report said.