New approach to regulation of fixed and mobile networks Relevant Markets International Forum of CRC: „Challenges of the Relevant Market Regulation for Telecommunications Networks and Services“, Bogota, 15 June 2012
Dr. Ulrich Stumpf
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Overview 1. Why review ex ante regulation of fixed and mobile networks? 2. How adapt ex ante regulation of dominant operators? 3. Give symmetrical ex ante regulation greater emphasis? A European perspective
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1. Why review ex ante regulation of fixed and mobile networks?
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Ex ante regulation must be adapted to multiple technological & commercial developments NETWORKS
RETAIL SERVICES
WHOLESALE SERVICES
NGN core netwoks
Ultrafast Internet access connections
Unbundled access to VDSL & fibre networks
VDSL & fibre access networks
New applications and services (e.g. IPTV, OTT)
Wholesale broadband access to VDSL & fibre networks
DOCSIS 3 upgraded cable networks
Partial convergence of fixed & mobile services
LTE networks
Differentiation of residential & businessgraded services
IP interconnection
Migration to NGN/NGA networks
Widespread bundling of services
Migration to NGN/NGA wholesale services
Investment incentives
Competition
Access remedies
Ethernet based dedicated capacity
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2. How adapt ex ante regulation of dominant operators? Regulated markets/operators
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Focus on, and principles of, ex ante regulation of dominant operators remain untouched 1. Targeted at competition problems related to dominance
2. Limited to electronic communications markets characterised by ďƒ˜ Persistent barriers to entry ďƒ˜ No tendency towards effective competition ďƒ˜ Ex post application of competition law alone not sufficient
3. No regulation at retail level if wholesale regulation is enough 5
Current ex ante regulation of dominant operators concentrates on voice & broadband access BROADBAND ACCESS
No related wholesale markets defined
Retail fixed calls
Transit Fixed call origination Fixed call termination on individual networks
Retail mobile access & calls
Mobile access & call origination Mobile call termination on individual networks
Retail fixed broadband Internet access
Retail mobile broadband Internet access
Wholesale Internet connectivity
No related wholesale markets defined
Wholesale broadband access Unbundled local loop; duct access
Retail dedicated capacity
Trunk segments of wholesale dedicated capacity Terminating segments of wholesale dedicated capacity
Regulated market = Market susceptible to ex ante regulation and characterised by SMP Unregulated market
WHOLESALE
WHOLESALE
Retail fixed access
RETAIL
RETAIL
VOICE
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Ex ante regulation for voice can be reduced 1. New retail market boundaries for voice
Fixed access & calls a bundle (voice)
VoIP a substitute for voice over PSTN
Mobile voice a partial substitute for fixed voice (residential customers)
Differentiation of business from residential services
2. Retail voice markets competitive subject to regulation of call termination on fixed & mobile networks 7
Ex ante regulation for broadband access must be maintained 1. New retail market boundaries for broadband Internet access
Ultrafast broadband (fibre/VDSL/DOCSIS3) a chain substitute for standard broadband (ADSL)
LTE a substitute for fixed broadband access, where enough capacity (residential customers)
Differentiation of business-graded services (faster/more reliable, multi-site) from residential services
Convergence of business-graded broadband access and dedicated capacity 8
Ex ante regulation for broadband access must be maintained 2. Platform competition alone is not effective, except in few countries (Romania with lots of overground wiring)
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Ex ante regulation for broadband access must be maintained 3. Usually, retail broadband access markets will only tend towards competition subject to continued wholesale regulation
Unbundling of fibre and VDSL networks and, where not technically or economically feasible, virtual local access
Wholesale broadband access (except possibly for residential customers)
Terminating segments of wholesale dedicated capacity
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Bundling may require new ex ante regulation
RESIDENTIAL BUNDLES
BUSINESS BUNDLES
Voice
Voice
Fixed broadband Internet access
Fixed broadband Internet access
TV/OTT
Dedicated capacity
Mobile
Mobile
GRADED, MULTI-SITE
STANDARD, SINGLE-SITE
1. Longer term trend towards separate retail markets for bundles (are we already there?)
2. Need to regulate wholesale access for all components? 11
2. How adapt ex ante regulation of dominant operators? Regulatory measures
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ﾃ始 the past, most ex ante regulation included cost oriented prices based on LRIC+ or FDC BROADBAND ACCESS
Retail fixed access
Retail fixed calls
Retail mobile access & calls
LRIC+
LRIC+ or FDC or retail-minus
Fixed Fixed call call origination origination
Wholesale broadband access
Retail mobile broadband Internet access
Retail dedicated capacity
Fixed call termination on individual networks
Mobile call termination on individual networks
Unbundled local loop; duct access
Terminating segments of wholesale leased lines
LRIC+ and asymmetric
LRIC+ and asymmetric
LRIC+ or FDC
LRIC+ or FDC
WHOLESALE
WHOLESALE
FDC or price cap
Retail fixed broadband Internet access
RETAIL
RETAIL
VOICE
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To avoid overcompensation, wholesale charges need to be reviewed Cost orientation to be based on efficient networks (the Modern Equivalent Asset) Fixed and mobile call termination: NGN Unbundling: Fibre access Wholesale broadband access: Fibre access/NGN
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To avoid overcompensation, wholesale charges need to be reviewed Cost orientation to be based on LRIC Fixed and mobile call termination: Pure LRIC in EU, but non-EU countries may go for LRIC+ Fibre unbundling: LRIC+
Copper unbundling: LRIC+ of fibre less performance delta between fibre and copper Wholesale broadband access: LRIC+ or retail-minus
Glidepath to target levels
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To avoid foreclosure, bundles need to be tested for margin squeezes 1. Margin squeeze tests for individual products alone do not allow to capture margin squeezes on bundles 2. Need to test bundles for margin squeezes ex ante 3. A competitor should be able to cover the costs of wholesale inputs plus its own downstream costs
4. Downstream costs of a reasonably efficient competitor versus equally efficient competitor?
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Current ex ante regulation of dominant operators includes non-discriminatory terms of access BROADBAND ACCESS
Retail fixed access
Retail mobile access & calls
Retail fixed broadband Internet access
Retail mobile broadband Internet access
Retail dedicated capacity
Non-discrimination
Non-discrimination Fixed call origination
Wholesale broadband access
Fixed call termination on individual networks
Mobile call termination on individual networks
Unbundled local loop; duct access
Terminating segments of wholesale leased lines
Non-discrimination
Non-discrimination
Non-discrimination
Non-discrimination
WHOLESALE
WHOLESALE
Non-discrimination
Retail fixed calls
RETAIL
RETAIL
VOICE
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To avoid foreclosure, non-discrimination needs to be implemented much more effectivley 1. Unbundling, wholesale broadband access, terminating segments Need to ensure equivalence of access, including in delivery & fault repair Functional separation as a measure of last resort
2. Transmission of third-party VoIP and other retail applications Need for minimum quality standards against blocking/throttling
3. Call termination and IP interconnection Discrimination less of a concern where there is reciprocal traffic exchange
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2. Give symmetrical ex ante regulation greater emphasis?
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Past symmetrical ex ante regulation focused on transparency & end-to-end connectivity BROADBAND ACCESS
Retail fixed access
Retail fixed calls
Retail mobile access & calls
Fixed call termination on individual networks
Mobile call termination on individual networks
End-to-end connectivity
End-to-end connectivity
Retail mobile broadband Internet access
Retail dedicated capacity
Transparency Transparency
WHOLESALE
WHOLESALE
Transparency, Transparency Transparency, number number portability portability
Retail fixed broadband Internet access
RETAIL
RETAIL
VOICE
Symmetrical regulation No symmetrical regulation
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Symmetrical ex ante regulation provides a complementary instrument to promote a variety of objectives 1. Ensure interoperability of services and end-to-end connectivity
2. Address market power independent of dominance 3. Avoid economically inefficient or physically impracticable duplication of access infrastructure to end-users 4. Promote net neutrality 5. Raise transparency and reduce switching costs 6. Protect the environment, public health, public security or to meet town and country planning objectives 21
All of these targets gain increasing importance Price caps for retail & wholesale intern’l roaming
Address market power independent of dominance
MVNO access for wholesale internat’l roaming
Address market power independent of dominance
Sharing of in-building wiring, (France, Spain, Portugal)
Avoid economically inefficient or physically impracticable duplication of access infrastructure to end-users
Infrastructure sharing & co-investment
Protect the environment, public health, public security; meet town/country planning objectives
Minimum quality levels for network transmission services
Promote net neutrality
Transparency obligations for transmission of applications
Reduce switching costs, promote net neutrality
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New approach to regulation of fixed and mobile networks – At the cross-road
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Muchas Gracias por su atenci贸n!
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D. Ulrich Stumpf wik-Consult GmbH Postfach 2000 53588 Bad Honnef eMail u.stumpf@wik-consult.com www. wik-consult.com
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