Volný goes after Telefónica O2

Upstart Internet provider Volný.cz (Volný) is suing telecom giant Telefónica O2 Czech Republic (O2) for 4 billion Kč ($230 million) over what it calls "illegal" pricing for O2's high-speed Internet connections.

Volný, part of the Dial Telecom Group, filed a suit March 30 that claims O2 unfairly set its ADSL prices in a way that prevented other firms from making competitive offers to customers between 2004 and 2010.

"At the end of 2003, Volný offered advantageous access to the Internet to almost one-third of Czech users," Volný spokesman Martin Dvořák said in a statement. "[O2], with its illegal price policy, blocked Volný and other competitors from offering customers ... connection to the Internet via ADSL."

Just a day before the suit was filed, O2 was also informed that the Anti-Monopoly Office (ÚOHS) had also opened legal proceedings, claiming the company had abused its dominant position on the broadband market. According to media reports, O2 has had as much as 95 percent of the ADSL market in recent years and currently controls about 82 percent. At the end of 2010, more than 800,000 subscribers were receiving their ADSL service from the company.

O2 spokesman Martin Žabka said the company "always, and under any circumstances, observes the law" and is therefore "unaware of any wrongdoing."

"We have repeatedly claimed and proved that the retail broadband access market is very competitive and includes different technological platforms such as ADSL, Wi-Fi and cable," Žabka said. "We will use all available legal avenues to prove that O2's conduct in this market was not anti-competitive."

He added that Volný sold its 13,000 noncorporate ADSL users to O2 in February before discontinuing its ADSL service.

O2, the country's largest telecom firm and part of Spanish-owned Telefónica, has said the ÚOHS case goes back to 2005 and that the office has been investigating them since September 2010.

While Volný maintains the timing of the lawsuit in relation to the ÚOHS investigation is merely a "pleasant coincidence," Ondřej Moravanský, a telecom analyst for Cyrrus, said both situations could present significant bottom-line problems for O2.

"If Volný succeeds in getting the entire proposed sum, it would cause O2 a sensible stroke," he said. "But the ÚOHS can impose a penalty of up to 10 percent of the company's takings, so that's really the bigger threat."

Moravanský said it is "possible but not probable" that other small telecom firms could join the lawsuit or file a separate action.

Volný has hired international law firm Pierstone to handle the suit against O2. The firm has specialized in telecom cases and successfully represented a Spanish firm in a similar case against Telefónica.

"The European Commission has already fined [Telefónica] for damages in a competition case," said Tomas Schollaert, Pierstone partner.

Jack Buehrer can be reached at
jbuehrer@praguepost.com