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The NGA Recommendation

24 November, 2010
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The NGA Recommendation

globaltelconews-admin by globaltelconews-admin
24 November, 2010
in English
0

On 20 September 2010, after almost 2 years of intense debate, the European Commission finally issued the Recommendation on regulated access to Next Generation Access Networks (NGA), as part of a complex package of measures, including also the Broadband Communication and the draft decision on Radio Spectrum policy, to boost the coverage and take up of high-speed broadband in Europe. The full document is available at ec.europa.eu / information_society / policy / ecomm/doc/library/recomm_guidelines/nga/en.pdf.

The recommendation is particularly welcomed for confirming the importance of competition in high-speed broadband services by regulating access to next-generation fibre networks. It is a good first step in providing the stability needed to develop Europes high-speed networks and services. Fact is, until now the deployment of NGA networks throughout Europe has followed different policies and approaches with the final result to lose coherence, undermine certainty and deter investments. The new rules should now put an end to such fragmentation by providing a common framework and ensuring the necessary consistency.

The recommendation focus on remedies which national regulators should impose operators dominant on NGA networks. The principle of technological neutrality is clearly confirmed, therefore the basic set of rules existing for traditional networks is extended to NGA networks, taking into account objective differences regarding competition constraints, investments, risks and cooperative agreements.

Thus, the full set of remedies, designed for the ladder of investment in the traditional networks, should normally be provided wherever SMP(Significant Market Power) is found on NGA networks: duct access; access to terminating segment of the line; unbundling of the local loop (ULL); sub-ULL; bitstream. It will depend on the NRAs analysis whether one or more remedies will be applied in specific cases. Reference offers should be made within 6 months of the NRA mandating the obligation.

Notably, the availability of duct access is not considered per se to be sufficient to ensure competition, contrary to the opinion supported by various incumbents like Telefonica and Deutsche Telekom. Access to the terminating segment will be imposed on the basis of SMP assessment but also to all operators if the conditions laid down by article 12 of the Framework Directive will be found (so-called symmetric access).

Focus will be mainly on ULL, which should be mandated regardless of architecture used by the SMP operator (point-to-point; G-Pon; etc). The European Commission suggests in recitals that technological development will address unbundling difficulties in time (eg through wavelength unbundling) and that in the meantime virtual unbundling (eg VULA as in the UK) could be offered as a substitute for a transitional period.

Copper sub-ULL which is already mandated in most countries should be made effective and supplemented by backhaul measures from the street cabinet including fibre and Ethernet backhaul. Existing bitstream obligations should be extended to at least vDSL (considered a chain substitute). Wholesale products should reflect technological capabilities of NGA infrastructure (especially for IPTV and other sophisticated services). SMP operators should make wholesale bitstream available 6 months in advance of its own retail launch of NGA services unless there are other effective safeguards to guarantee non-discrimination (unclear if this means functional separation).

As regards the geographic application of remedies, NRAs should define subnational markets only if they identify substantially different conditions of competition which are stable over time. In other cases, NRAs may assess whether the evolution of competitive conditions warrants differentiated remedies. The requirement for ULL access could only be waived in geographic areas where there are several alternative infrastructures such as FTTH networks and/or cable in combination with voluntary competitive access offers. In areas where ducts access or ULL have lead to effective competition in the downstream market, then bitstream remedies could be withdrawn.

Pricing for all forms of access should normally be cost-oriented except that bitstream may be priced on retail minus/margin squeeze test basis if there are sufficient upstream constraints on the price or if functional separation is in place and proven effective. No risk premium should be given for duct access or copper subloops. A risk premium is presupposed for FTTH deployments. FTTN/vDSL deployments are considered less risky than FTTH, but could be considered riskier than existing copper.

Long term or volume discounts should only be considered for FTTH deployments and not for FTTN/vDSL. Where a discount is approved, the price after the discount can be no lower than the risk-free rate and no margin squeeze should apply for a reasonably efficient competitor (margin squeeze should be considered over an appropriate (undefined) period). When volumes are involved, one discount level should be set, taking into account the minimum operating scale for a competitor to compete in the market and the need to maintain a market structure with sufficient operators to ensure effective competition.

Where operators coinvest on the basis of multi-fibre lines and the competitive conditions are sufficiently different so as to justify a separate geographic market, SMP may no longer apply in the co-investment area in justifying a no SMP finding NRAs should particularly examine whether each co-investor enjoys equivalent and cost-oriented access to the joint infrastructure and whether they are competing on the downstream market.

Regarding migration from traditional networks: existing obligations including copper unbundling should remain in place unless agreement is reached on an appropriate migration path between the SMP operator and access seekers. In the absence of agreement the SMP operator should provide 5 years notice before decommissioning interconnection points such as the local loop exchange. The notice period may be less than 5 years if fully equivalent access is provided at the point of interconnection.

In conclusion, the recommendation is an essential milestone in the European NGA scenario. However, in order to reap the benefits of increased speeds and lower prices, implementation is key and national telecoms regulators will need to take swift action in markets where consumers continue to be condemned to overpriced, second-rate services.

* Former ECTA Chairman

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