Swisscom loses lawsuit over forwarding charges

The dispute had been raging for eight years. In 2012, Swisscom had terminated its contract with Init7 and demanded higher charges for forwarding data from Init7's network to the Swisscom network (IP interconnection). Prior to that, Init7 had a contract with Swisscom in which both sides bore their own costs.

The case is about dominance on the Internet. Until now, Internet providers have charged content providers money for the connection to the customer. The latter had no choice but to pay - either the telecom provider or a transit provider - because they could not get directly to the end customer.

Only the really big providers, such as Netflix or Google, would be able to avoid the obligation to pay, said Init7 CEO Fredy Künzler on Wednesday when asked. Swisscom caved in to Netflix a few years ago. All other providers, such as Zattoo, would have to pay Swisscom for access, Künzler said.

Comcom must set new fees

Init7 had filed a lawsuit against what it considered to be "massively excessive compensation" for network interconnection and forwarding and lost before the Federal Communications Commission (Comcom). However, the Federal Administrative Court has now come to the conclusion that Swisscom is market-dominant: it is undisputed that Switzerland's largest telecoms group, as the owner of the "national telecoms infrastructure, has a technical monopoly for access to its end customers," according to the ruling, which is available to the AWP news agency.

The court thus overturned the decision of the telecom regulator Comcom and upholds Init7. Comcom must now set the cost-oriented price for data forwarding, Init7 wrote in a communiqué. This means that an additional claim by Swisscom for 550,000 francs to Init7 is off the table. In addition, Init7 will save the 126,400 francs in procedural costs imposed on it by the lower court.

However, the ruling has a broader impact. In the future, powerful providers with many broadband customers will no longer be able to artificially increase the price of IP interconnection through competitive agreements and make it more difficult for smaller providers to access their customer base, Init7 wrote.

At Swisscom, it's about more money, Künzler said. It is unclear exactly how much. Swisscom did not comment on this when asked.

Swisscom checks

The "blue giant" explained: "Swisscom takes note of the decision and is currently examining it in detail." It is now up to Comcom to determine the prices that Init7 will have to pay for data forwarding to the Swisscom network until the end of 2015. In addition, Comcom would have to examine the market and competitive conditions from 2016. The ruling of the Federal Administrative Court makes it clear that data forwarding must be paid for, albeit on a cost basis and not free of charge as originally demanded by Init7.

The Federal Administrative Court's ruling cannot be appealed to the Federal Supreme Court. "It is therefore final," the ruling states. (SDA)