Putting an end to non-price discrimination – the role of EOI Prepared for the BEREC Roundtable on EOI 29 April 2014 Alexandre Serot Head of Public Policy Fixed Services

Outline Non-price discrimination remains a fundamental barrier to effective competition in fixed broadband The role of EOI to address non-price discrimination Key learnings from Vodafone’s experience A closer look at some of the questions raised by BEREC What can BEREC do to assist?

Non-price discrimination remains a fundamental barrier to effective competition in fixed broadband The risk-reward equation for discriminatory behaviour needs to be changed Vertically integrated incumbents have an incentive & ability to discriminate Discriminatory behaviour is hard to track, esp. when no KPIs & reliable info is made available Evidentiary threshold is high & penalties too low The outcome has been continued widespread discrimination & uneven competitive level playing field to the detriment of consumers despite the imposition of non-discrimination as an obligation… UK, DE: failures of incumbents to meet Leased lines delivery times DE, PT: unnecessary engineers visits for LLU Billing issues: Poor billing (e.g. use of fax) ES: Unstable & inefficient system integration for ordering & fault management Poor ordering & provisioning processes (inaccurate databases, high order rejection rates) leading to discriminatory treatment of orders Incomplete SLAs and/or low penalties Penalties unnecessarily complex to claim No reporting on service performance

The role of EOI to address non-price discrimination Competition on the merits for the benefits of consumers requires non-discriminatory access to bottlenecks The ultimate goal is how to ensure that fit-for-purpose wholesale services enabling technical & economic replicability are offered on a non-discriminatory basis Equivalence of Input whereby the same systems and processes are used by the altnets and the downstream arm of the incumbent represents best practice to implement the non-discrimination obligation EOI should be imposed as the default approach to non-discrimination: For consumer services For enterprise services Implementation of the 2013 Recommendation should be accelerated. NRAs need to do more and take decisive steps tackle discriminatory behaviour Market reviews of M4 and M5 in a number of countries are largely outdated and there is no remedies for fibre based products and/or limitations (e.g. Spain & Portugal)

Key learnings from Vodafone’s experience EOI has been positive to curb discriminatory behaviour in the UK Regime should prioritise high impact areas Systems and processes design should not be left to the incumbent They can be designed to advantage the incumbent and/or generate unnecessary costs on altnets EOI should apply to all SMP products necessary to provide retail services E.g. backhaul, collocation, need to avoid ‘silos of EOI’ Safeguards are necessary to ensure equal treatment for new services requests or specific requirements requests Any requests for departure from the EOI standard should be closely scrutinized and its impact on the overall objective assessed. Past benefits from discrimination should be taken into account when considering costs Independent & empowered oversight board It is critical to have a sound governance in place to monitor and enforce the EOI regime Equivalence regime should be periodically reviewed & amended As the industry and service requirements changes, so should the regime

Key learnings from Vodafone’s experience EOI alone is not sufficient. A complete equivalence regime must include : KPIs measuring performance at the wholesale & (incumbent) retail levels KPIs should be independently audited & made available Comprehensive & robust SLAs and associated penalties to incentivise compliance with SLAs Appropriate sanctions to deter non-compliance Additional safeguards in the form of organisational & cultural changes (e.g. financial incentives, code of conduct, change to Senior Management) Those elements are necessary to monitor compliance and to ensure that the equivalence obligation results in non-discriminatory outcomes Further, appropriate mechanisms are required to improve & stretch wholesale services performance over time EOI does not address by itself the issue of poor wholesale services Equivalence plans with commitments from Senior Management, milestones and sanctions should be put in place and consulted upon Those plans should address the organisational and cultural changes required (branding, code of conduct, compliance, pay incentives)

The overall quality, SLAs and penalties of wholesale services in Europe is patchy & needs servious improvement Enforceability of SLAs and Penalties (ULL, BitStream, Leased Line) The table below indicates whether an SLA is in practice enforceable with a penalty, and if so, whether the penalty is deemed feasible to claim in practice. Where a penalty is deemed difficult to claim, the rationale is recorded in the Notes section below. Notes SLA Level in excess of level deemed achievable by local OpCo SLA Penalty calculated on a per-impacted user basis SLA Level calculated on an aggregate / average performance basis SLA Penalty caveated with partial commitment (e.g. Penalty will not apply to first 10% of breaches / only applies after breach has persisted for 10 days)

A closer look at some of the questions raised by BEREC Under A. What is EOI? EOI alone does not guarantee EOO by itself. Actual wholesale service performance needs to be monitored Generic obligation of non-discrimination should remain even when EOI is in place EOI may ensure technical replicability but not economic replicability Under B. How is EOI implemented in practice EOI should apply to the SMP services and ancillary services (e.g. collocation) necessary to offer retail services Under C. Are their any specific requirements to ensure EOI EOI does not guarantee an appropriate level of QoS -> need to be completed by robust & comprehensive KPIs, SLAs & penalties Under D. what are the specific information requirements to ensure EOI? Exactly the same info as provided to the incumbent’s retail arm should be made available, inc. re future roll-out Under E. what are the system requirements to implement EOI? System and processes should be designed to support competition and achieve non-discrimination Under F. how is the compliance regime designed? Under G. How do NRAs estimate the costs and benefits of implementing EOI? Take into account past benefits of discrimination & expected consumer benefits

What BEREC can do? Promote EOI as a best practice for the implementation of non- discrimination obligation Review & comment on equivalence plans Coordinate the definition and publication on a quarterly basis of a standard set of KPIs independently measured and audited across all Member States in a format which allows ready comparison and benchmarking Collection and publication of key SLAs & penalties applied by SMP operators in a format which allows ready comparison and benchmarking

Thank you alexandre.serot@vodafone.com +44 750006 9175