1. Regulation of NGA networks – the EU experience
Inês Nolasco
Senior Regulatory Affairs Manager
European Competitive Telecommunications Association

2. Outline
NGA networks Transition to NGA: investment & competition Regulatory tools – the EU experience

3. NGA networks – FTTH PON, FTTH P2P, FTTC, Docsis 3.0, 4G, Satellite

4. NGA conundrum – investment & competition?
High investments required
Risk – demand & take-up uncertainty?
Regulatory uncertainty?
The NGA conundrum: How to encourage timely and efficient investments in NGA & innovation while at the same time safeguarding effective competition (key driver of investment over time) and ensuring a level-playing field?

5. Competition has delivered significant benefits for consumers
Source: Analysys Mason Research, ECTA Scorecard

6. Underlying dominance remains

7. NGA lines account for only 20% of total fixed BB lines at EU level, Jan 2013

8. Alternative operators use predominantly physical access New entrants’ DSL lines by type of access Source: Communications Committee

9. Competition & regulation in NGA - challenges
Key bottlenecks remain in the transition to NGA. Network duplication not economically viable in all areas.
Regulatory certainty needed. Art. 7 review experiences.
Main EU NGA regulatory tools & instruments
NGA Recommendation (2010)
Costing & Non-discrimination Recommendation
(2013)
Relevant markets & the Art. 7 review

10. Promotes the consistent implementation of remedies in an NGA context
NGA Recommendation
Adopted on 20 September 2010 as part of the Broadband package (RSPP, BB Communication)
Sets out a common EU regulatory approach for access to new high-speed fibre networks
Promotes the consistent implementation of remedies in an NGA context

11. NGA Recommendation - Main features
Piece of soft law – Not legally binding but NRAs obliged to take “utmost account” of the Recommendation. Any departures from the Recommendation need to be justified.
Contains measures intended to safeguard competition & promote investment/ innovation
No regulatory holidays!

12. NGA Recommendation - Main features
NRAs able to select from the full range of access remedies available:
Access to civil engineering infrastructure, terminating segment, sub-loop unbundling, fibre unbundling, bitstream access
Cost orientation remains the pricing methodology of choice for all types of remedies but NRAs have specific tools to push investment:
risk premium when setting regulated ex ante access prices (primium included in the cost of capital)
pricing flexibility (long-term commitment contracts/ volume pricing)
Co-investment schemes between operators diversify the investment risk and can lead to a relaxation of ex ante regulation

13. Continued validity of the ladder of investment essential to ensure competition in NGA
Allows for new market entry and competition from alternative providers – essential to ensure access to key wholesale inputs

14. Recommendation on consistent non-discrimination obligations & costing methodologies (ND&CM)
Adopted in September 2013
Follow-up to the NGA Recommendation. Guidance on the imposition of cost-orientation and non-discrimination obligations on SMP operators (Markets 4 & 5).
NGA Recommendation suggested cost-orientation as rule. Limited exceptions (retail-minus for bitstream)
Recommendation ND&CM ‘reverses’ this principle: NGA networks exempted from cost-oriented wholesale access pricing to incentivise investment.

15. Recommendation on ND&CM – key provisions
No cost-oriented wholesale access on active & passive NGA wholesale inputs (pricing flexibility) if:
supplied on the basis of equivalence of inputs (EoI/ technical replicability - altnets able to replicate new retail offers by the retail arm of the SMP operator)
economic replicability test (margin retail price SMP operator & NGA wholesale input)
demonstrable retail price constraint stemming from:
Active wholesale inputs
take-up of upstream M4 inputs/EoI, or
presence of alternative infrastructures
Passive wholesale inputs
Legacy access network product offered by the SMP operator at cost-oriented prices
Operators providing service over at least one alternative infrastructure not controlled by SMP operator
BU LRIC+ as the recommended costing methodology for setting copper & fibre prices (specific asset valuation for reusable ducts).

16. Relevant markets & the Art. 7 review
List of markets to be regulated ex-ante defined by the European Commission
National Regulatory Authorities analyse the markets, identify the operator with Significant Market Power and impose regulatory obligations. European Commission has a veto power in some circumstances.
Markets 4 & 5 related to the broadband markets (physical network infrastructure access and wholesale broadband access)
List of 7 markets is currently under review

17. Competition & regulation in NGA – key challenges
Incumbents commercial choices & inadequate regulation can impinge on access by alternative operatos to NGA networks
Sub-loop unbundling vs vectoring – multi-operator vectoring?
VULA vs fibre unbundling
Unbundling of FTTH PON networks – availability of WDM?
No cost-orientation for NGA access – margin squeeze?

18. Thank you for your attention