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1. Introduction - purpose of the BEREC draft report and relation to the Commission Recommendation

ETNO welcomes the present consultation by BEREC on the regulatory accounting approach to the economic replicability test (ERT).

The Commission recommendation on consistent non-discrimination obligations and costing methodologies (“the Commission recommendation”) in its Annex II provides detailed guidance with regard to the parameters of the economic replicability test.

Against this background, ETNO encourages BEREC to clearly define the purpose of its document. The format of a report lends itself to a descriptive approach, clarifying current practices and differences to the Commission recommendation. The report should not aim to provide guidance that limits interpretations of the recommendation and its Annex II or deviates from it.

We therefore encourage BEREC to adopt a flexible approach to its guidance where the Recommendation itself leaves discretion and not preclude interpretations fostering the goal to enhance NGA investment that the Commission text would allow.

Similarly, the wording of the draft report on the aim to “align […] the current practice of ex-ante margin squeeze tests as applied by NRAs and the main characteristics of the recommended ERT” (p. 5) may be misleading. Ex-ante margin squeeze tests currently carried out by NRAs may not at equal measure aim to enhance pricing flexibility to support NGA investment as does the Recommendation. A ‘mutual alignment’ would not take these different starting points into account.

We believe that any supplementary guidance on the ERT should the firmly guided by the set of objectives underlying the Recommendation.

The aim of the Commission recommendation is to establish more flexibility for the network operator investing in NGA, thereby enhancing incentives for broadband
investment while continuing to safeguard competition in the market.

ETNO has a number of concerns outlined in this response with regard to the interpretations and guidance proposed in the draft report to give as they run contrary to the stated objectives of the recommendation.

In some instances, BEREC cites objectives that are not aligned with those of the recommendation to justify its findings (e.g. “Prevent penetration pricing strategies”, p. 48, “facilitate market entry” p. 50). ETNO urges BEREC to clearly recognise that the ERT differs in objectives from standard ex-ante margin squeeze tests applied to legacy copper networks and to reflect this fact throughout the text of its report. The recommendation also clearly makes the distinction.1 In this context it would be necessary to include the objective of favouring NGA investments in the “primary objective” section in point 4.1 of the BEREC draft. It is an objective that flows from the Recommendation and from NRA practice, but is not integrated in the current text.

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Download the full Reflection Document here.