WIK Online Workshop: The new EC Recommendation on Relevant Markets - Key changes and implications for the sector - WIK ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
WIK Online Workshop:
The new EC Recommendation
on Relevant Markets
Key changes and implications for the sector
Ilsa Godlovitch
Christian Hocepied
Dr. Cara Schwarz-Schilling
19 January 2021
Programme
Online Workshop 19 January 2021
In December 2020 the European Commission adopted a new version
of the Recommendation on Relevant Markets susceptible to ex ante
regulation.
The Commission took into account – amongst other inputs – the
findings of a study prepared by WIK-Consult on “Future electronic
communications markets susceptible to ex ante regulation.”
https://ec.europa.eu/digital-single-market/en/news/study-future-
electronic-communications-product-and-service-markets-subject-ex-
ante-regulation
1
Programme
Online Workshop 19 January 2021
In the workshop we explore
Key market and technological developments in the telecom sector
which underlie changes to the Recommendation;
What is changing in the Recommendation and why;
Implications for national regulatory authorities on the delineation of
markets for consumer broadband, and business use and the potential
consequences for the finding of Significant Market Power;
Recommended principles for geographic market definition and how
this may affect the segmentation of markets and remedies
Potential impacts for telecoms network and service providers and
implications for competition and investment in the sector
2
Programme
Online Workshop 19 January 2021
The new EC Recommendation on Relevant Markets:
key changes and implications for the sector
14:00 – 14:05 Opening Remarks
(Dr. Cara Schwarz-Schilling, WIK)
14:05 – 14:20 Introduction to the relevant markets recommendation
(Kamila Kloc, European Commission)
14:20 – 15:10 Broadband Markets Part I:
(Ilsa Godlovitch, WIK)
15:10 – 15:20 BREAK
15:20 – 16:00 Broadband Markets Part II:
(Ilsa Godlovitch, WIK)
16:00 – 16:30 Fixed and Mobile Termination
(Christian Hocepied, University of Namur)
16:30 Closing Remarks
(Dr. Cara Schwarz-Schilling, WIK)
3Programme
Online Workshop 19 January 2021
Broadband Markets
Ilsa Godlovitch
4Discussion points (1)
Physical Infrastructure Access
In which circumstances should NRAs define a separate market for
PIA vs mandating it as a remedy?
How might a separate PIA market affect downstream regulation?
How should SMP PIA regulation interact with BCRD PIA?
Wholesale broadband access markets
How should WLA be defined, and where should the connection
point be?
What are the implications of copper switch-off for the definition of
the WLA market?
What are the implications of copper switch-off for the WLA market?
How should cable be handled within the WLA and WCA markets?
Why was the WCA market removed and in which circumstances
should it be defined at national level? 5Discussion points (2)
Wholesale dedicated capacity
What should be the scope of the market for wholesale dedicated
capacity? Is there a clean break between high quality bitstream and
dedicated capacity?
How should fixed and mobile backhaul be handled? Should these
use cases for dedicated capacity be included in the same market as
business access, and if so in which circumstances?
What might be the implications for regulated operators, access
seekers and business users of including dark fibre in the market?
Geographic segmentation
What are the key principles for geographic segmentation in WLA
and dedicated capacity markets?
What is the potential impact of the Commission’s new guidance in
geographic segmentation on regulatory practice and market
outcomes?
6Agenda
Retail broadband markets
Physical Infrastructure Access
Wholesale broadband markets (mass-market)
Wholesale dedicated capacity
Principles for geographic segmentation
7Key trends in telecoms markets to 2030
Technological and service developments
Big data processing, digitisation of industry and public services
driving demand for symmetric dedicated bandwidth
Switch-off of copper, and migration to VHC
Deployment of 5G, and associated expansion of IoT applications
Business models
Layered model: specialisation by some operators in infrastructure
(including wholesale only models); or
Vertical integration: contrasting strategy for e-communications
providers to focus on value in downstream markets e.g. IoT
applications, business solutions, content
Convergence (wholesale and retail) between fixed and mobile
Competition
Expansion of infrastructure-based competition (esp dense areas)
Elsewhere: co-investment solutions, wholesale only / fragmented 8
supplyImplications for retail broadband market
scope
Demanding requirements to support digitisation
Distinction between mass-market and high-end business
Dedicated connectivity (P2P FTTH or equivalent) required for big
data processing, eHealth, remote learning, applications requiring
low latency, real-time transmission etc
Shared / best effort sufficient for most residential use as well as
businesses / sites with less demanding needs
Migration to VHC and copper switch-off
Copper will become distinct segment (for bus and res)
5G deployment
5G mobile unlikely to substitute (shared medium / data caps); but
5G FWA may substitute in some situations e.g. rural, low end
Increased dependence by MNOs on fibre backhaul
9Competitive trends absent regulation
Improved competitive conditions especially in very dense areas and
business districts; but
Mass-market choice beyond cable is often supported by SMP regulation
(especially PIA, WLA)
Symmetric rules cannot adequately replace SMP regulation
BCRD access not well suited to telecoms, utility infrastructure
presents challenges
Code symmetric rules are aimed at terminating segment / in-building
(does not solve problem completely / nationwide)
Substitution from new technologies e.g. 5G only in specific areas / cases,
and may depend on SMP regulation e.g. PIA, backhaul
Voluntary co-investment could support competition, but tends to be
geographically limited, or limited to specific operators
Wholesale only may not address all competitive concerns
10Retail data markets: conclusions
Market definition
Separate market segments for
- Mass-market (including shared VHC) data connectivity for
residential and business use. Likely over time to exclude
copper. 5G FWA may be included in certain situations e.g. rural
- Dedicated high quality access for business use. Likely over time
to exclude copper
A single market may exist in countries where point to point fibre is
widely available
Competitive trends
The mass-market and high quality segments do not tend towards
effective competition on a nationwide basis; but
Some areas could be competitive e.g. business districts or (more
rarely) dense areas / MDUs where VHC replication viable in
absence of SMP PIA 11Agenda
Retail broadband markets
Physical Infrastructure Access
Wholesale broadband markets (mass-market)
Wholesale dedicated capacity
Principles for geographic segmentation
12Physical infrastructure access
When is it appropriate?
Most NRAs have mandated PIA as a remedy under the WLA market
(supported by article 72 of the Code)
However, some have concluded that PIA could substitute for physical
or unbundled access (e.g. FR previous approach); and more recently Ofcom
identified and ARCEP proposed PIA as a separate market
Conversely some NRAs e.g. SE, BG consider that SMP PIA regulation is not
necessary e.g. due to limited demand and/or practice under BCRD
PIA may be appropriate as a separate market if:
There are SMP operator(s) which have comprehensive non-overlapping
PIA network(s)
SMP PIA is or is likely to play a significant role in supporting 3rd party
VHCN
Other solutions may be more appropriate if:
Telecom PIA networks are fragmented; and/or
Telecom PIA is unlikely to play a significant role in supporting 3rd party
VHCN
Other solutions (e.g. remedy under art 72, BCRD) are adequate to meet 13
needsPhysical infrastructure access
Implications for downstream regulation
A key test which may highlight the case for PIA as a separate market is
its potential to lead to different SMP outcomes downstream
The following scenarios would tend to support the case for a separate
PIA market:
SMP PIA could support infrastructure competition in WLA and / or
dedicated capacity such that it could lead to a conclusion of no
SMP in certain areas (most likely dense urban or business
districts).
SMP PIA could enable an alternative operator other than the
incumbent to deploy VHC in a given area e.g. in less dense areas
including in the context of State Aid. It is possible in turn that this
VHC network operator might have SMP in WLA in the area
concerned.
14Physical infrastructure access
SMP PIA vs BCRD PIA
SMP PIA may have advantages over BCRD PIA for access seekers
Designed to accommodate eComms networks
Ubiquity of incumbent PIA (in many, but not all countries)
Not subject to specific security / safety / resilience concerns which
may apply to certain other networks e.g. gas, electricity, rail etc
Potential for ex ante regulation vs case by case in BCRD
Specific toolbox of measures and enforcement mechanisms
SMP PIA likely to be preferred for telecom PIA and should be prioritised
wherever there is demand and it is feasible; but
BCRD PIA also plays an important role where PIA from other networks
can support VHCN deployment (electricity poles have proved valuable in
rural areas in several countries e.g. FR, PT);
BCRD PIA may offer an alternative to SMP telecoms PIA where demand
for PIA is limited, telecom PIA is fragmented and the BCRD is proactively
15
enforced.Agenda
Retail broadband markets
Physical Infrastructure Access
Wholesale broadband markets (mass-market)
Wholesale dedicated capacity
Principles for geographic segmentation
16Wholesale local access
How should WLA be defined?
The definition of WLA in the context of copper LLU was relatively
straightforward i.e. access between customer and MDF site.
WLA in the context of point to point fibre deployments could also be defined
with reference to the network architecture (access between customer and
ODF site).
However, defining the limit of “WLA” may be more complex in the context of
FTTC/VDSL and FTTH PON deployments.
The concept of “economic viability” of the connection point for the access
seeker may be relevant (i.e. aggregation of sufficient lines).
Intermediate connection points e.g. subloop may be relevant where demand.
17Wholesale local access
What are the implications of copper switch-off?
Status copper switch-off (% copper exchanges)
Note: Figures in red are extrapolated. Switch-off in Italy is partial and refers to the feeder segment.
Voluntary and in time mandatory copper switch-off is expected to
accelerate and is expected to be largely complete in the next 5-10 years.
There may be a justification to segment copper (including potentially
FTTC/VDSL) from VHC technologies where copper-based services no
longer provide a pricing constraint or where copper switch-off is planned.
18Wholesale local access
What is the role of cable and FWA?
Cable is unlikely to offer the technological capability for VULA in the
medium-term (DOCSIS 4.0 unlikely in 5-10 years). Cable would therefore
not normally provide a direct constraint to FTTx VULA, although it might
be included in the WLA market on the basis of indirect constraints (see
e.g. UK and Germany).
5G FWA may substitute other broadband technologies permanently in
certain circumstances e.g. rural. Where this is the case NRAs should
reflect this (geographic) substitutability in the Mkt defn.
5G FWA could also substitute wired broadband in more dense areas for
low-end use and/or where FTTH has not yet been deployed, but this may
be temporary. Case by case assessment is required.
Prospects for competition from 5G FWA in rural areas (as well as
elsewhere) may depend on the potential for self-supply or access to fibre
backhaul.
19Other market definition approaches
When might WCA be appropriate?
The 2020 Relevant Market Recommendation foresees that the WCA
market is not susceptible to ex ante regulation (does not meet 3 criteria
test at EU level)
Key reasons:
Competition from cable operators & operators using WLA in many
regions (some also providing bitstream)
Potential for rural copper bitstream to be replaced by FWA and
(where viable) FTTx VULA (which may involve longer loops than
LLU)
There might still be a case for WCA regulation in specific cases e.g.
competition still nascent, needs of specific user groups e.g. multi-national
businesses not met through commercial means; but
Alternative solutions should be promoted with the goal of supporting
migration to FWA and/or WLA solutions and fostering a competitive
bitstream segment, including for businesses
20Other market definition approaches
When might single market be appropriate?
NL, DK, MT have proposed identifying a single wholesale fixed access
market which encompasses WLA and WCA wholesale products
including VULA and cable bitstream.
A key consideration is whether access seekers would switch between
local access products (offering greater flexibility and quality) and regional
access.
Normally such switching would not be expected to occur as users of
WLA have made investments which would be stranded, while users of
WCA may lack scale to make use of WLA; but
Substitution by access seekers might occur where cable (for which WLA
is not possible) is ubiquitous and offers greater performance and/or
coverage of VHC BB than alternative available technologies.
Relevant to consider switching potential for existing wholesale access
seekers, and situation facing a potential new entrant (if realistic).
21Agenda
Retail broadband markets
Physical Infrastructure Access
Wholesale broadband markets (mass-market)
Wholesale dedicated capacity
Principles for geographic segmentation
22Wholesale dedicated capacity
What is meant by a terminating segment?
Leased line terminating segments
Point to point connections are available in some countries, or in the context of
a P2MP architecture, there may be an access element (specific to the building)
and a backhaul segment in which traffic is aggregated and transmitted to the
backbone network of the carrier.
Terminating segments may be defined with reference to the connection
between the customer and “closest serving exchange” or by exclusion (e.g.
excluding specified “trunk” segments as in AT).
Where the network architecture does not allow for a straightforward distinction,
terminating segments could be defined with reference to a viable connection
point capable of supporting competitive supply of dedicated (guaranteed)
capacity.
23
Access at intermediate points could support further investment incentives.Wholesale dedicated capacity
What characterises dedicated capacity?
Mass-market “shared” VHC broadband connections such as FTTH PON
are likely to meet the requirements of some businesses or business sites,
and can be analysed in the WLA market, with consideration of specific
business SLA needs.
However, some business use cases require greater capacity, reliability
and flexibility than can be offered via mass-market solutions.
Increasing (and more geographically widespread) demand is expected
from SEDs such as hospitals and schools, public administrations and
SMEs using “big data” incl. HPC processing.
Required characteristics may include: dedicated and uncontended
connections with symmetric bandwidth, guaranteed availability, SLA.
Point to point leased lines via Ethernet or WDM could meet these
requirements or point to multi-point if guaranteed bandwidth can be
provided, i.e. through VPNs. Dark fibre could also be used where
operators have the capability to add their own active equipment.
24Wholesale dedicated capacity
Treatment of backhaul?
Backhaul for fixed and/or mobile connectivity is regulated in several
jurisdictions e.g. as an “associated facility” to WLA e.g. FR, or in the high
quality market e.g. AT, UK.
From a technical perspective there are no distinctions between dedicated
capacity used for business access and backhaul.
There might be differences in the competitive characteristics associated
with different use cases, but may be influenced more by the potential to
supply multiple users at a given site than to the purpose (for business
access or for backhaul).
For this reason some NRAs e.g. AT allow use of dedicated capacity for any
purpose.
Concerns have been expressed that this may limit incentives to invest in
mobile backhaul, but equally cost models suggest 5G will require fibre
backhaul deployment in areas where duplication is not viable. Potential
solutions?
Limit regulation of dedicated capacity to geographic areas where duplication
of fibre (for any purpose) is not viable; and/or
Potential distinction based on connections to MDU / multiple office / 25
addressable subscribers?Wholesale dedicated capacity
Implications of including dark fibre
Some NRAs such as those in UK and AT have concluded that dark fibre
is a substitute for active leased lines.
This principle is supported by the ability of operators selling wholesale
leased lines to sell the underlying dark fibre, and the relatively limited
barriers to business operators to add active equipment.
The tendency to use fibre unbundling e.g. in SE for business purposes
also supports this conclusion.
Provision of dark fibre may enable additional scope for innovation e.g. in
the technological interfaces used, and provides flexibility to quickly scale
up bandwidth, thereby supporting competition in quality for business
services as well as enabling rapid scale-up of bandwidth for fixed and
mobile backhaul.
There may be concerns that regulating dark fibre could undermine the
scope for end to end infrastructure competition.
This could be addressed by limiting regulation of dark fibre and the
highest capacity dedicated access to areas where replication (including 26
via PIA) is not viable.Agenda
Retail broadband markets
Physical Infrastructure Access
Wholesale broadband markets (mass-market)
Wholesale dedicated capacity
Principles for geographic segmentation
27Geographic segmentation
Increasing importance
Technological and competitive developments are likely to increase the
case for geographic segmentation in both WLA and dedicated capacity
segments.
In particular copper, which has provided a core rationale (alongside PIA)
for the national scope of WLA and some HQA markets, is likely to
become less relevant, requiring analysis of VHC technologies, which may
have a different competitive dynamic.
Signals that geographic segmentation may be relevant include:
Differences in the levels of competition and pricing in retail products
Emergence of or potential for infrastructure-based competition in
VHC networks and/or dedicated connectivity in certain areas
(dense areas, business districts). Co-investment schemes having
similar effect
Transition from fixed to wireless solutions e.g. in rural areas
supporting a different competitive dynamic
Localised provision of VHC networks (regional carriers) including in 28
the context of State AidGeographic segmentation
Potential principles
Assess based on modified greenfield approach, whether there are variations
in competition at the retail level e.g. due to different main suppliers, different
numbers of infrastructure-based suppliers, differences in the number or
nature of ISPs, quality and prices available, or stark differences in wholesale
market shares (including self supply)
If retail differences are found conduct detailed geographic analysis at
wholesale level
Principles for geographic analysis for mass-market and HQA may differ where
limited FTTH, but may converge over time
Base wholesale analysis on actual data and prospective deployment (where
VHC deployment is advanced). Rely on theoretical analysis based on
business case / likelihood of deployment where VHC is less advanced
Geographic units
Choose geographic units to reflect scope of coverage of existing
infrastructure-based competitors and the relevant areas for investment
decision-making for potential new entrants.
Aggregate areas by similarity of SMP status e.g. prospective 29
competition vs joint or single SMP, identity of the SMP providerGeographic segmentation
Potential principles (2)
Indicators for competition
NRAs should primarily be guided by distinctions in market conditions
which result in different conclusions in different areas regarding SMP
Numbers of networks are relevant, but not definitive
Coverage thresholds should take into account the potential (or
otherwise) for expansion by the operators concerned. Higher coverage
and overlap requirements may be needed where limited prospect of
further network expansion
When considering infrastructure competition, networks should only be
considered if independently operated e.g. via physical infrastructure or
IRU
Any impact of business models such as wholesale only or co-
investment should be assessed at the retail level
Incumbent retail market shares may be relevant as they could signal business
case for wholesale only investor or existing operator to (co-)invest. 40-50%?
Prospects of wholesaling on fair and reasonable terms in absence of
regulation for mass-market and business supply should be taken into account 30Programme
Online Workshop 19 January 2021
Fixed and Mobile Termination
Christian Hocepied
31Retail voice markets
expectations
In most MS, the incumbent fixed operator continues to control the
majority of telephone lines. The share is more substantial in the non-
residential market. Incumbents will likely retain substantial market power.
Altnets will continue to be confronted with access issues. However,
the completion of the migration to all IP networks and the
generalization of PABX supporting IP voice will ensure choice in
the non-residential market in the period 2020-2030;
current captive ‘voice only’ customers are likely to migrate to
bundles in the period 2020-2030;
remedies in the wholesale broadband access markets are expected
to allow the removal of CS/CPS obligations taking also into account
the mentioned continued take up of bundles in the period 2020-
2030 in the currently lagging Member States.
32Wholesale termination markets
conceptual framework
Importance to distinguish between
Interconnection: the linking (whether directly or indirectly by
physical or logical means) of one network and another, enabling
end-users of different networks to communicate with one another
and to access services provided on a different network.
Termination: service by a fixed or mobile operator consisting in
completing calls from customer of other networks
1997-2000: main issue was interconnection, not termination
From 2004 onwards termination became the main issue, due to (i)
explosion of number of subscribers on ANO, in particular mobile and (ii)
the debate on symmetric vs asymmetric termination rates.
2014 Markets recommendation: addresses “markets for termination” –
interconnection seen as an ancillary service
33Wholesale termination markets
competition concerns
Relevant retail voice markets:
Fixed voice, mobile voice and, possibly, markets for bundled products.
‘calling party pays’ principle motivated SMP regulation of fixed and mobile
termination on narrowly defined markets to preclude:
Excessive prices (e.g. ‘bill shocks’ fixed to mobile calls);
raising rivals’ costs;
Dissuading churn by differentiating ‘on net’ and ‘off net‘ retail tariffs (‘club
effect’).
Market & Regulatory evolution
decrease in value in voice traffic over the years reduces benefit of
leveraging termination market power;
High termination when reflected in retail prices pushes subscribers to use
WhatsApp, Viber and other OTTs at the expense of voice.
smaller market share differentials between most mobile operators (excl.
MVNOs)
symmetric Eurorates provided under Article 75 EECC, which regulates also the
34
fees for interconnection ports)Wholesale narrowband markets:
impact of application of the EECC
The Eurorates address the termination bottleneck (resulting from calling
party pays).
margin left to negotiate preferential termination tariffs is limited
However, Eurorates do not cover some one-off fees and non-
pricing interconnection issues.
Issue is now interconnection
Today addressed in markets 1 and 2 by transparency (reference
interconnection offers), non-discrimination and, as regards larger
MNOs and fixed incumbents, accounting separation obligations.
Question: is continued regulation of both markets required to allow
carrying over the current transparency and non-discrimination
obligations?
35Wholesale narrowband markets:
The three criteria test
Termination or interconnection market?
High and non-transitory barriers to entry
Each network is a separate product market and every operator has
a 100 % market share on the provision of wholesale termination to
its network.
NRAs must take into account countervailing buyer power : is the
exercise of market power by an operator constrained?
Can be constrained by other types of (sector-specific) regulation,
decisions or legislation applicable to the relevant retail and related
wholesale market(s).
Question: what is the likelihood of terminating operators systematically
refusing access, interconnection or imposing discriminatory and non-
transparent conditions, taking into account these other regulatory
obligations?
36Wholesale interconnection markets:
symmetric regulation to be taken into account
Symmetric regulation include:
Article 15(2) EECC: gives ECS providers the right to obtain access
to, or interconnection from, other providers of publicly available ECS
covered by a general authorisation.
Art.13 & Annex I EECC entitles NRAs to impose in general
authorisations
- access obligations (Part A (7)), obligations re. interconnection
of networks (Part B (1)) and requirements linked to the provision
of service using numbers (Part E (1)).
Art.61(2) EECC entitles NRAs to impose further ex ante specific
obligations on their own initiative.
- The scope of the obligations is the same as Art.73 EECC, but
other objective: securing “adequate access and interconnection
and interoperability of services in the interest of end-users”.
Article 61 EECC also entitles NRAs imposing obligations in the
context of the settlement of dispute between interconnecting 37
operatorsWholesale interconnection markets:
symmetric regulation to be taken into account (II)
dispute settlement procedures under Art.26 EECC as complement to the
interconnection obligations under the general authorisation, allows NRAs
to detail and specify obligations or on off interconnection fees.
Member States may include in the general authorization, transparency
obligations on providers of public electronic communications network to
ensure end-to-end connectivity and, where necessary and proportionate,
access by competent authorities to such information needed to verify the
accuracy of such disclosure (Point 9 of Part C of Annex I).
Transparency requirements include the obligation to publish
reference offers
In addition, general authorizations can under Art.20(1) EECC require
operators to provide all information, including financial information,
necessary for the NRA to ensure conformity with obligations.
38Wholesale narrowband markets
conclusion
However the wholesale markets are defined - call termination market or
interconnection market – they do not fulfil the second of the three criteria
test of Art.67(1) EECC, in view of alternative solutions, including indirect
interconnection
see also Rec.42 of 2020 Markets recommendation and section
4.2.3 of the accompanying SWD(2020) 337 final
An NRA can, based on national circumstances and experience, rebut the
general conclusion that available symmetric regulation is adequate to
ensure that the relevant market would tend towards effective
competition.
This will depend on:
applicable national (symmetric) remedies, including appeal
mechanisms, and
market structure specific to each Member State such as number of
interconnection agreements to monitor.
39Additional transition issue
WLR
NRAs of three Member States impose WLR based on SMP in wholesale
markets
Netherlands, Spain and Ireland (market 2/2007)
Other NRAs impose the same obligation in market 3a/2014
[now market 1/2020]
Italy and Greece
Likely to become increasingly obsolete
40WIK Wissenschaftliches Institut für Infrastruktur und KommunikationsdiensteGmbH Postfach 2000 53588 Bad Honnef Deutschland Tel.:+49 2224-9225-0 Fax: +49 2224-9225-68 eMail: info@wik.org www.wik.org Study: https://ec.europa.eu/digital-single-market/en/news/study-future-electronic- communications-product-and-service-markets-subject-ex-ante-regulation
You can also read
