Nuevas aproximaciones regulatorias para redes fijas y moviles

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?

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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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