News | Wednesday, 25 February 2009

Office of Fair Competition hides behind confidentiality on GO-NextWeb merger

Charlot Zahra

The Office of Fair Competition has remained reticent about prospective investigations into the transfer of hosting services from NextWeb Ltd to GO plc announced earlier this month, claiming confidentially.
“In these circumstances it is to be noted, and this is also required by the said regulations that any specific information acquired by the Director on such matters is confidential,” Consumer and Competition Division (CCD) Director-General Mireille Vella tersely told Business Today.
This newspaper asked, among other things, whether the OFC had been informed about the transfer of hosting and internet services from Nextweb to GO, if the OFC had launched an investigation on the proposed take-over and whether the OFC had given its consent to this operation.
Vella explained that mergers and acquisitions are regulated by the Control of Concentrations Regulations, 2002. “It establishes a series of thresholds which have to be met in order for a concentration to be notifiable to the Director of the Office for Fair Competition,” Vella told Business Today.
“By way of example, undertakings concerned are to conduct an assessment of their independence, the purchase of securities and assets; the occurrence of the takeover and also there is a specific formula on the way an assessment of the turnover of the said undertakings is to be carried out,” the CCD Director-General added.
Business Today also asked for the OFC’s view on the fact that as a result of this deal, an alternative ISP was being taken over by one of the “big three”, and how the agreement would affect the competition in the broadband internet market.
However, the CCD Director-General skirted that question, referring us back to the Malta Communications Authority (MCA).
“If one is interested on an analysis of the broadband market and determination of market power, one may consult the recent assessment undertaken by the Malta Communications Authority issued on 14 November 2008,” she told Business Today.
However on 4 Feburary 2009, we asked the MCA whether it had been informed about the deal between GO and NextWeb.
“Under the laws administered by the MCA, both companies in question are not obliged to inform the Authority about agreements concluded for the transfer of NextWeb hosting services to GO plc,” an MCA spokesperson had said.
However the MCA had been informed that “commercial difficulties were being experienced by NextWeb vis-à-vis their obligations to GO plc,” the MCA spokesperson had told Business Today.
“The MCA made it clear to both parties that at all times, the customer interests should be safeguarded,” she had added.
The MCA had also offered to facilitate communications between NextWeb and GO plc “in relation to outstanding commercial issues with a view to minimising negative impact on NextWeb subscribers”, the MCA spokesperson had added.
The MCA spokesperson had said that it would not be launching an investigation on the proposed take-over. “On the basis of information available to it and the laws administered by the Authority, it does not appear that investigations are necessary at this point in time,” she had told Business Today.
“The MCA would launch an investigation if indications are that there has been a breach of obligations,” the Authority’s spokesperson added.
Asked on whether the MCA had given its consent to this operation or not, the Authority’s spokesperson told this newspaper that “in the circumstances, the parties in question do not require the MCA’s consent to transfer hosting and Internet services from NextWeb to GO plc.”
The MCA spokesperson also said that the Authority “regrets the closure of any undertaking in the sector that it regulates.
“However, it acknowledges that it is a reality of a competitive market,” she told Business Today.
Regarding the impact of this merger on the competitive level of the market, she explained how the regulation of the electronic communications sector was carried out “in accordance to the EU Framework, which establishes that specific markets are examined for Significant Market Power and allows the imposition of specific remedies on dominant operators.
“The MCA will impose remedies where appropriate, in accordance to the regulatory framework,” the Authority’s spokesperson told Business Today.

Local ISP market consolidated
The announcement that GO plc had taken over the Internet and hosting services offered by NextWeb and NextGen Limited respectively was made on 3 February 2009.
NextWeb and NextGen Limited clients had been notified about the move in an e-mail sent to all the subscribers of the two companies shortly after midnight.
“On 2 February 2009, NextWeb Ltd (the company operating Next Web’s Internet service) has concluded an agreement with GO plc for the transfer of all its Internet-related services to GO plc.
“As a result of this agreement, Internet services are now being provided to you by GO, and therefore GO is now your Internet service provider,” the e-mail sent to all NextWeb and NextGen subscribers stated.
The e-mail sent to all subscribers, of which Business Today had obtained a copy, informed them that they “can continue to access the Internet and use related services in exactly the same way you are doing now. Any changes which might be required will be communicated to you individually.”
NextWeb and NextGen subscribers were also informed that they “do not have to change anything in terms of hardware or modems in order to continue benefiting from your Internet service.”
“Your hosting and email addresses, as provided to you by NextWeb, will remain the same, and GO will continue providing you the same addresses,” the e-mail stated.
In a joint statement later in the morning, GO had said that “NextWeb, NextGen IT and GO will be working together to ensure the smooth transition of the customers’ subscription with no disruption in the service”.
It was a historical irony that the ISP founded by former Maltacom plc chairman Tony Mejlaq to compete with GO shortly after being removed from office in 1998, had transferred its operations to GO after a battle of ten years.
In the meantime, Euroweb had joined forces with rivals Keyworld and NextGen, two other internet service providers, to form NextWeb, which operated as an ISP, while NextGen focused on web hosting services.
However, when GO and Melita started competing aggressively for retail subscribers around two years ago, bypassing the independent ISPs and competing directly with them for market share, the fate of most small ISPs was sealed.


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25 February 2009

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