ETNO welcomes the present consultation on BEREC’s 2014 Work Programme. This contribution will also cover selected aspects of BEREC’s views on the draft TSM regulation proposal.^[1]

The document BoR (13) 142 covers important areas of BEREC’s work for 2014 and takes firm positions on subjects which have not been previously discussed with the sector. While this is clearly not the sole responsibility of BEREC, a more in-depth analysis of the provisions of the draft regulation and discussions with stakeholders could have clarified some of the assumptions underlying BEREC’s position, for example that the provisions “conflict with the fundamental purposes of the current regulatory framework to promote competition” or “trigger market consolidation”. It is doubtful whether any of the provisions of the draft regulation could have such effect.

Executive Summary

• ETNO welcomes the opportunity to share its view on BEREC’s Work Program for 2014. In our consultation response we decided to also cover elements of BEREC’s opinion on the Commission proposal for a regulation on a Telecoms Single Market (BEREC document BoR (13) 142) as BEREC can be expected to continue to work and to share its views on the draft regulation in 2014. 
• ETNO encourages BEREC to focus its work in 2014 on incentivising increased investment in high-speed fixed and mobile broadband infrastructure while ensuring sustainable competition in electronic communications markets. We are concerned that despite the priority of the draft 2014 WP to “boost the roll out of Next Generation Networks” the approach on key regulatory topics outlined in the consultation document and in BEREC’s views on the Single Market regulation is, on balance, not favouring investment in high-speed networks in Europe.
• ETNO urges BEREC to revise its broadband Common Positions on remedies in markets 4 and 5 in the light of the recently adopted Commission Recommendation on non-discrimination and costing methodologies in order to reflect the option to lift price regulation for NGA wholesale products in the presence of effective non-discrimination and infrastructure competition.
• We are concerned that BEREC in its draft WP plans to adopt public documents (‘reports’) on complex economic matters such as oligopolies and an ex-ante margin squeeze test without foreseeing a public consultation. ETNO had voiced similar concerns over the adoption of BEREC policy papers without sector involvement its comments on BEREC WPs in the past.
• ETNO welcomes BEREC’s intention to publish a draft CP on geographic market definition and suggests that the topic becomes a central element of BEREC’s input to the revision process on the Commission recommendation on relevant markets.

Introduction

ETNO welcomes the present consultation on BEREC’s 2014 Work Programme. This contribution will also cover selected aspects of BEREC’s views on the draft TSM regulation proposal.^[1]

The document BoR (13) 142 covers important areas of BEREC’s work for 2014 and takes firm positions on subjects which have not been previously discussed with the sector. While this is clearly not the sole responsibility of BEREC, a more in-depth analysis of the provisions of the draft regulation and discussions with stakeholders could have clarified some of the assumptions underlying BEREC’s position, for example that the provisions “conflict with the fundamental purposes of the current regulatory framework to promote competition” or “trigger market consolidation”. It is doubtful whether any of the provisions of the draft regulation could have such effect.

1. Boosting the roll-out of NGA

ETNO encourages BEREC to primarily focus its work in 2014 on creating a regulatory framework that better incentivises private investment in high-speed broadband networks.

• BEREC broadband remedies CPs

ETNO notes that already the BEREC WP 2013 contained the objective to “boost the roll-out of next generation access networks”. The positions BEREC has adopted in the past year, however, have in many instances not contributed to a favourable environment for investing in fixed high-speed broadband. While BEREC’s work on cost accounting / costing methods and its advice to the Commission in this regard has had an overall positive impact, BEREC’s broadband Common Positions on remedies in markets 4, 5 and 6 provide a too stringent framework for an investing operator subject to regulation, notably by relying on cost-orientation as a default remedy and on an outdated ‘ladder of investment’-based conception of access-based competition.[2]  

Against this background ETNO calls upon BEREC to revise its broadband Common Positions on remedies in markets 4 and 5 as soon as possible in the light of the recently adopted Commission Recommendation on non-discrimination and costing methodologies, in particular in order to reflect the option to lift price regulation for NGA wholesale products in the presence of effective non-discrimination[3] and infrastructure competition. The draft WP recognises that there is a possible tension between the recommendation and the BEREC CPs but does not indicate how and when the necessary changes to the CPs could be implemented.

• Assessment of the effects of access-based regulation on investment

In its draft WP, BEREC fails to distinguish the effects on access network investment of infrastructure competition, e.g. from cable, on the one hand, and of access-based competition on the other[4] despite overwhelming evidence that it is infrastructure competition that primarily drives investment in the access network. Instead, BEREC seems to dismiss the complex trade-offs between regulation-based entry and investment incentives by talking about a “perceived coverage vs. competition trade-off”. Such rash conclusions on investment incentives do not, in our view, constitute a sound starting point for shaping public policy in one of Europe’s key economic sectors. ETNO encourages BEREC to substantiate or remove the according discussion in its final Work Programme.

Similarly, BEREC’s finding that the “ladder of investment” is still a meaningful concept in an NGA environment is surprising and seems to not take into account the evidence from over a decade of alternative NGA deployment that has mostly followed different patterns.

• Workstream on virtual access / bitstream products and Vectoring

Notwithstanding our concern with the continued reference to the LoI-concept in an NGA context, ETNO welcomes BEREC’s finding that in some cases an active local access products (‘VULA’/bitstream) can be the “highest rung” of access obligations. As a recent study for ETNO by Plum consulting et. al. outlines, such products may well be the only efficient access product for NGA in some  cases, with the situation differing between and potentially within countries.[5]

ETNO notes that the work on VULA and bitstream access products described in the draft CP is not fully transparent. If workshops will be carried out with external participation ETNO and / or its members would be happy to contribute. ETNO believes it is important to keep harmonised EU level requirements to VULA and bitstream products at a reasonable minimum in order to allow for market solutions that are timely and proportionate.

We are surprised that BEREC discusses “whether Vectoring is a sensible intermediate step or FTTH roll-out should take place directly” as a “vital question”. The question does not appear to fall within BEREC’s remit as far as it concerns business decisions taken by individual companies, as well as, in most member states, funding decisions by the public. We encourage BEREC to adopt a technologically neutral approach and explore ways to promote the roll-out of high-speed infrastructures by appropriate changes to regulatory practice in view of the individual technology and network topology chosen by the investor.

• Comments on access regulation in BoR (13) 142 (views on TSM regulation)

BEREC in it views on the draft Telecoms Single Market regulation claims that the Commission proposal to no longer require a physical unbundling of fibre but accept a virtual access product undermines infrastructure-based competition. This concern appears unfounded in view of the capabilities of advanced bitstream products and physical unbundling products on fibre networks respectively, in particular considering that NRAs so far have chosen to require access to VULA at the same network layer as the previous unbundling product and/or provide for rules on product migration. 

ETNO supports BERECs call for caution against setting out parameters and functionalities of access products at EU level in an overly detailed and technical manner. National processes which allow for an analysis of the specific demand for specific product features and of the appropriateness of the remedy in light of the market failure identified remain important to ensure a consistent and proportionate outcome.

• Geographic Market Segmentation and symmetric regulation

ETNO supports a more in-depths analysis of the geographic segmentation of markets and remedies. As stated in the draft, “geographic segmentation becomes more important as markets and infrastructures develop in an increasingly fragmented fashion.” We note that BEREC considers indirect constraints as important in this context

The workstream should result in guidance for a more proportionate regulatory practice that does not limit the ability of established operators to enter into competition with other platforms in highly competitive areas.

BEREC should in parallel carry out work on appropriate symmetric solutions that could apply in the place of SMP regulation. Access market are becoming more and more local with the consequence that service providers need to have a commercial relationship with local suppliers, sometimes in different parts of the value-chain. As a result, if there are persistent bottlenecks that require regulation they will in many situations not be the incumbent’s network. This has to be reflected in future regulation.

While this could to some extent be achieved with a more local regulatory approach when assessing the geographical sub-markets, especially in markets that are characterised by competition at infrastructure level with a high degree of geographical variation it will in practice not be practicable to rely on the SMP-methodology.[6]  BEREC should examine whether SMP regulation should not  be replaced in the future by a symmetric regulation on equal access to persistent bottlenecks such as in-house cabling and/or the infrastructure on the last stretch leading into the building as long as there is no parallel competing infrastructure and/or it is not profitable to establish a parallel infrastructure.

• IP Interconnection

We are concerned that the position expressed on IP IC in the WP and on the ASQ product in BEREC’s position on the TSM regulation risk undermining innovation in Europe.

Specifically, BoR (13) 142 appears to argue against specific commercial models that could enhance quality of service and provide new revenue streams for the sector when it states that “including ASQ in the regulation simply raises its profile in favour of terminating operators who have long sought to charge for terminating traffic at guaranteed QoS something that BEREC and the Commission argued strongly against.”

Especially if a transmission at improved quality of service is offered, charging for such a service should be possible on either side of the two-sided market. We expect that BEREC would welcome such a development that contributes to high quality service-provision and can contribute to funding future network investment in the EU.

2. Consumer empowerment and protection

• Net Neutrality

The Digital Agenda goals of providing EU citizens with widely available high-speed broadband demand a significant effort in private infrastructure investment - an objective that is challenged by the decline in the revenues of the telecoms sector over the past years. As laid out in a recent study by the Boston Consulting Group carried out for ETNO, this decline also has to be seen in the context of a lack of a regulatory level playing field with ‘over the top’ Internet players and between different world regions in important policy areas. [7] ETNO is concerned that the TSM regulation currently under discussion risks adding a further layer of regulation in the area of traffic management which asymmetrically affects European network operators. 

ETNO in principle supports the positions described and next steps envisaged on the open Internet and traffic management in the draft WP. In particular we share BEREC’s view that the current framework would be sufficient to cope with any net neutrality-related issues that arise.

However, ETNO has strong concerns with regard to several elements of the position on Net Neutrality expressed in BEREC’s views to the draft regulation, BoR (13) 142, which does not fully reflect the current work of BEREC and appears to be inconsistent with the discussion held by BEREC with stakeholders over the past years. In particular, by asking for inclusion of volume and speed ‘premium conditions” in the scope of application of the traffic management principle (current Art. 23 (5) of the draft regulation), BEREC’s position risks being read as advocating a prohibition of any service differentiation in the Internet Access service. Similarly, adding another condition to the specialised service definition (“closed network”, the precise meaning of which is unclear) could further limit the scope of the concept, putting into question the possibility to provide new and innovative service offers across different networks.

• Comments on consumer protection in BoR (13) 142

We note with surprise that BEREC fails to mention a major inconsistency of the Commission proposal with the current framework, namely the regulation of a competitive retail service, Intra-EU international calls in Art 21 (3) of the draft regulation.

We urge BEREC to raise with the Commission the disproportionate nature of such proposal in a market found to be competitive by both the Commission and most NRAs. 

3. Horizontal and Regulatory Quality aspects

ETNO encourages BEREC to engage fully and transparently with stakeholders on the issue of “oligopolies” and ex-ante margin squeeze tests listed under this item of the WP. In particular, BEREC should refrain from recommendations on changing the current EU regulatory framework or the Commission’s SMP guidelines with regard to regulatory intervention in markets characterised by a limited number of competing networks (the norm in telecommunications markets), unless there was clear and demonstrable evidence of consumer harm that result from the present rules.