E-COMMUNICATIONS LAW COURSE FALL 2012 PART 3 AND 4 - ACCESS AND INTERCONNECTION JENS CHRISTIAN GJESTI

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1 E-COMMUNICATIONS LAW COURSE FALL 2012 PART 3 AND 4 - ACCESS AND INTERCONNECTION JENS CHRISTIAN GJESTI 1. OVERVIEW OF PART 3 AND 4 Overview f Access and Intercnnectin Why is access regulated and need fr access regulatin Different types f access (intercnnectin (terminatin, transit and riginatin), mbile cverage/capacity (Natinal Raming and Mbile Virtual Netwrk Operatr access, resale and fixed netwrk access (LLU, fibre etc.)) What rle d these terms play in the verall framewrk? Regulatin f peratrs with and withut SMP Regulatin f varius access frms including intercnnectin (terminatin, transit and riginatin), mbile cverage/capacity (Natinal Raming and Mbile Virtual Netwrk Operatr access, resale and fixed netwrk access (LLU, fibre etc.) Relevant examples f cases Dynamic regulatin Cnflicts relating t access and intercnnectin The NRA s rle in mediating and determinatin f cnflicts 2. WHY IS ACCESS REGULATED? Liberalisatin (tl t prmte cmpetitin): New entrants have yet t rll ut their wn netwrk r they d nt have a netwrk f the same magnitude as the incumbent peratr The incumbent cntrls facilities that are essential fr new entrants that intend t cmpete with the incumbents retail arm Intercnnectivity (ensure interperability): Custmers are cnnected t ne netwrk. In rder t call ther custmers cnnected t ther netwrks the netwrks must be intercnnected 3. WHAT ROLE DOES ACCESS REGULATION PLAY IN THE REGULATORY FRAMEWORK? Access and intercnnectin is essential t achieve interperability between netwrks and t prmte cmpetitin Art. 12 f AD is ne f the mst fundamental rules and establish the crnerstne fr impsing access rules. Other bligatins relate t the terms and cnditins fr prviding access t cmpetitrs (transparency, nn-discriminatin, cst accunting and price cntrl) Access regulatin plays an imprtant rle in the regulatin f vertically integrated peratrs (see mdel) Page 1(13)

2 IN Netwrk peratr Billing Operatins Infrastructure Whlesale/access markets Cmpetitrs need access in rder t cmpete Access t netwrk Telephne service Retail markets End-users 4. DIFFERENT TYPES OF ACCESS Intercnnectin: Intercnnectin cvers issues such as the physical and lgical cnnectin f tw r mre netwrks. It als cvers specific issue relating t the traffic sent between netwrks. The specific issues are nrmally divided in t terminatin (incming calls), riginatin (utging calls) and transit (calls passing trugh withut riginatin and terminatin). Capacity and cverage in mbile netwrks: Natinal Raming and MVNO Resale f mbile vice, fixed vice, subscriptins, whlesale bradband etc. LLU and fibre (access t physical lcal lps) The varius issues are cvered by different relevant markets: Terminatin Fixed netwrk = market 9 (new market 3) Mbile netwrk = market 16 (new market 7) Access and riginatin Fixed netwrk = market 8 (new market 8) Mbile netwrks = market 15 (remved frm revised recmmendatin) Packet-switched (IP) vs. circuit-switched (vice) intercnnectin arrangement 4.1 Intercnnectin Access Directive art 4(1) states that Operatrs f public cmmunicatins netwrks shall have a right and, when requested by ther undertakings s authrised in accrdance with Article 4 f Directive2002/20/EC (Authrisatin Directive), an bligatin t negtiate intercnnectin with each ther fr the purpse f prviding publicly available electrnic cmmunicatins services, in rder t ensure prvisin and interperability f services thrughut the Cmmunity. Operatrs shall ffer access and intercnnectin t ther undertakings n terms and cnditins cnsistent with bligatins impsed by the natinal regulatry authrity pursuant t Articles 5 t 8. ; Definitin f Intercnnectin (AD art 2) states that intercnnectin is the physical and lgical linking f public cmmunicatins netwrks used by the same r a different undertaking in rder t; allw the users f ne undertaking t cmmunicate with users f the same r anther undertaking, r t access services prvided by anther undertaking. Services may be prvided by the parties invlved r ther parties wh have access t the netwrk. Page 2(13)

3 Intercnnectin is a specific type f access between public netwrks 5. BASIC INTERCONNECT MODEL TERMINATION Netwrk Operatr A Bill frm NO B t NO A= Terminatin fee Netwrk Operatr B Netwrk A POI= Pint f intercnnect Netwrk B Subscriber X Bill frm peratr A t X= Retail price X pays retail price t NO A fr Traffic charge (RP1) Cnnectin charge (RP2) Terminatin part f call Subscriber Y 5.1 Technical apprach Subscriber X = calling party and Subscriber Y = called party. Subscriber X is cnnected t Netwrk A (perated by Netwrk Operatr A) Subscriber Y is cnnected t Netwrk B (perated by Netwrk Operatr B) Call set up riginates in Netwrk A (X) and terminates in Netwrk B (Y) Call set up means the lgical set up f a separate call. Terminatin means that the call terminates in a different netwrk (B) than the riginating netwrk (B) 5.2 Cmmercial apprach Subscriber X is a custmer f NO A Subscriber Y is a custmer f NO B Operatr A and B enters int an intercnnectin agreement s that X can call Y. NO As cst fr this call NO A s wn csts (use f netwrk A + ther csts), Terminatin fee (use f netwrk B) Prfit. 5.3 Billing NO B bills NO A fr intercnnectin fee The terminatin fee is determined by NO B The terminatin fee is nrmally cmputed Call set up charge Per minute charge (may vary between peak and ff-peak hurs) NO A bills subscriber X fr the retail price. The retail price is nrmally cmputed t cver NO A s csts and cnsists f Page 3(13)

4 RP1 traffic charge: The traffic charge is nrmally reflecting the variable csts relating t the call and cvers NO As use f wn netwrk (Netwrk A) terminatin fee payable t NO B fr use f Netwrk B prfit RP2 cnnectin fee: The cnnectin fee is usually cvering the fixed csts relating t the access netwrk t the subscriber and is nrmally included in the peridic subscriptin fee (mnthly r quarterly) 6. INTERCONNEC T MODEL ORIGINATION Netwrk Operatr A Bill frm NO A t NO B fr riginatin fee N bill frm NO B t NO A fr Terminatin fee Netwrk Operatr B Originatin part f call Netwrk A POI= Pint f intercnnect Netwrk B Bill frm peratr A t X= Cnnectin charge (RP2) Subscriber X Bill frm peratr A t X=Traffic charge (RP1) Subscriber Y 6.1 Technical apprach Same as fr terminatin (see abve) Key issue: Subscriber X is cnnected t Netwrk A Subscriber X dials a fur digit prefix (identificatin f NO B) 6.2 Cmmercial apprach Subscriber X has a dual custmer relatinship custmer f NO B fr traffic custmer f NO A fr the fixed cnnectin Subscriber Y is a custmer f NO B. Operatr A and B enters int an intercnnectin agreement. Originatin means that NO A registers that Subscriber X is a custmer f B by using a call-by-call selectin r carrier preselectin. 6.3 Billing The call is billed by NO B (wh bills fr the traffic) NO A sends a bill fr the fixed cnnectin (subscriptin fee). Cmpare t LLUB: NO B may alternatively lease the access line t subscriber X and thus bill fr bth traffic and cnnectin Page 4(13)

5 7. INTERCONNECT MODEL TRANSIT Transit fee Terminatin fee Retail price Netwrk A Netwrk C Netwrk B Subscriber X Subscriber Y Transit part f call 7.1 Technical apprach Physical linking between A and C and B and C, but nt between A and B directly X cnnected t A and Y cnnected t B When X calls Y the call is transited thrugh C t B and B terminates 7.2 Cmmercial apprach NO A and NO C has entered int a intercnnectin agreement NO B and NO C has entered int a intercnnectin agreement C pays terminatin fee t B A pays transit fee t C. The transit fee is nrmally cmputed t cver the cst fr use f C s netwrk the terminatin fee charged by C NO A bills the custmer 7.3 Advantages Makes it pssible fr new entrants wh des nt have resurces t enter int intercnnectin agreements t intercnnect with a large number peratrs Technically it is sufficient t intercnnect t ne peratr (wh s cnnected t many ther netwrks) 8. THE RELEVANT MARKETS Call Terminatin Market 3 individual fixed netwrks Market 7 individual mbile netwrks Access and call riginatin Market 2 fixed netwrks Market 15 mbile netwrks (natinal raming). NB: This market is remved frm list ver relevant markets i Cmmissin Recmmendatin) Page 5(13)

6 9. NRA TOOLBOX FOR ACCESS (Step 0: Identify the extent and nature f any market failure/cmpetitin prblems) Step 1: Cnclude that SMP peratr must give access (direct) (A: Fllws frm an existing bligatin) B: NRA impses a general bligatins C: NRA impses a specific bligatin Step 2: Determine the terms & cnditins fr prvisin f access (direct) A: nn-discriminatin B: price regulatin C: reasnable D: transparency Step 3: Determine the need fr ther bligatins n the SMP peratr (indirect) A: transparency B: cst accunting separatin and prvisin f infrmatin C: Structural separatin (new remedy in 2011) 10. THE ACCESS AND INTERCONNECTION DIRECTIVE (AD) 10.1 Overview Regulates the prcedures and criteria fr intercnnectin and access t electrnic cmmunicatins netwrks The cncept f access and intercnnectin is brader than befre LLU is included in the Directive and Regulatin will be lifted Imprtant criteria fr request fr access t mbile netwrks, CATV netwrks etc. Limitatins n the bligatins that Member States can place n SMP market players Interventin shall be Specific, apprpriate and temprary. Unclear what this means fr new and undevelped markets 10.2 Scpe, aim and definitins The scpe is widened and includes ther types f netwrks and ther types f intercnnectin/access than tday TV netwrks, new elements fr mbile netwrks, ther types f special netwrk access (cnditinal access and ther facilities) General prvisins (II) Right and bligatin t negtiate intercnnectin (Art. 4) Public Digital TV netwrks: must enable and prvide unaltered wide-screen frmats (Art. 4) Cnfidentiality bligatin (Art. 4) Pwers and respnsibilities f the NRA (Art. 5) NRA shall encurage and ensure adequate access and intercnnectin, and interperability f services, Obligatins and cnditins by NRA must be bjective, transparent, prprtinate and nndiscriminatry, Must be able t intervene at its wn initiative Chapter III bligatins n peratrs Page 6(13)

7 10.3 Definitin f access in AD art. 2 (a) means the making available f facilities and/r services, t anther undertaking, under defined cnditins, n either an exclusive r nn-exclusive basis, fr the purpse f prviding electrnic cmmunicatins services. Access cvers inter alia: access t netwrk elements and assciated facilities, which may invlve the cnnectin f equipment, by fixed r nn-fixed means (in particular this includes access t the lcal lp and t facilities and services necessary t prvide services ver the lcal lp) access t physical infrastructure including buildings, ducts and masts access t relevant sftware systems including peratinal supprt systems access t number translatin r systems ffering equivalent functinality access t fixed and mbile netwrks, in particular fr raming access t cnditinal access systems fr digital televisin services access t virtual netwrk services 11. ACCESS TO AND USE OF SPECIFIC NETWORK FACILITIES (ART. 12) N clear definitin n exact applicatin, but the NRA must use their discretin If the NRA finds that denial f access and unreasnable terms/cnditins hinder the emergence f a sustainable cmpetitive market at the retail level (dwnstream market).. r wuld nt be in the users interest, then Reasnable request must be met 11.1 Art. 12 access bligatins may include: Gd faith negtiatins t give third parties access t specified netwrk elements and/r facilities, including access t netwrk elements which are nt active and/r unbundled access t the lcal lp, t inter alia allw carrier selectin and/r pre-selectin and/r subscriber line resale ffers; Nt t withdraw access Open access t technical interfaces, prtcls, ther key technlgies indispensable fr interperability f services r virtual netwrk services C-lcatin r ther frms f assciated facilities sharing (ducts, buildings r masts) Prvisin f specified services needed t ensure interperability f end-t-end services (including facilities fr intelligent netwrk services r raming n mbile netwrks) Access t peratinal supprt systems r similar sftware systems t ensure fair cmpetitin T intercnnect T prvide access t assciated services such as identity, lcatin and presence service. Natinal regulatry authrities may attach t thse bligatins cnditins cvering fairness, reasnableness and timeliness Discretinary test under art. 12 Article 12 (2) When natinal regulatry authrities are cnsidering the bligatins referred in paragraph 1, and in particular when assessing hw such bligatins wuld be impsed prprtinate t the bjectives set ut in Article 8 f Directive 2002/21/EC (Framewrk Directive), they shall take accunt in particular f the fllwing factrs: Technical and ecnmic viability f using r installing cmpeting facilities rate f market develpment and type f intercnnectin and access invlved, including the viability f ther upstream access prducts such as access t ducts Page 7(13)

8 Feasibility f prviding the access in relatin t the capacity available the initial investment by the facility wner, taking accunt f any public investment made and the risks invlved in making the investment; the need t safeguard cmpetitin in the lng term with particular attentin t ecnmically efficient infrastructure-based cmpetitin; any relevant intellectual prperty rights; the prvisin f pan-eurpean services. Accrding t current cmmunity law (i.e. Brnner) this will be a narrw test several existing elements in the legal evaluatin is nt cvered (i.e. reasnability) Art 12 (3) When impsing bligatins n an peratr t prvide access in accrdance with the prvisins f this Article, natinal regulatry authrities may lay dwn technical r peratinal cnditins t be met by the prvider and/r beneficiaries f such access where necessary t ensure nrmal peratin f the netwrk. Obligatins t fllw specific technical standards r specificatins shall be in cmpliance with the standards and specificatins laid dwn in accrdance with Article 17 f Directive 2002/21/EC (Framewrk Directive). 12. OBLIGATIONS OF TRANSPARENCY ART. 9 Infrmatin frm SMP peratrs must be publicly available (art. 9 (2)) accunting infrmatin, technical specificatins, netwrk characteristics, terms and cnditins fr supply and use and prices Reference ffers (RIO) Ensure nn-discriminatin (art. 9 (2)) Reference ffers must be sufficiently unbundled (art. 9 (2)) Level f detail can be decided by NRA LLU fferings shall cntain the elements in annex II SMP Operatr Subsidiary f Internal Dminant firm External Dminant firm Cmp 2 Transparency makes it pssible fr Cmpetitr t gain necessary inf. A prerequisite fr nn-discriminatin 13. OBLIGATION OF NON-DISCRIMINATION ART. 10 SMP peratrs must apply equivalent cnditins in equivalent circumstances Allws differentiated terms in different circumstances = differentiatin Prvide services t thers under the same cnditins and in the same quantity as it prvides fr its wn (subsidiaries/partners) services. Des nt allw fr much flexibility Des allw a small margin f differentiatin, depends n what is cnsidered the same N changes frm earlier principles Internal Nn-discriminatin, accunting separatin etc. Subsidiary f Dminant firm SMP Operatr External Cmp 1 Cmp 2 Cmpare SMP Cmpare 1 and 2: peratr and 1/2: cnditins must be cnditins must be EQUIVALENT the SAME Page 8(13)

9 14. ACCOUNTING SEPARATION ART. 11 When there is a nn-discriminatin bligatin vertically integrated cmpanies must prvide (inter alia) Whlesale prices and Internal transfer prices Aim: T prevent discriminatin and Prevent unfair crss-subsidy NRA may specify the frmat and methdlgy Mst NRA's require LRIC (as ppsed t histrical cst fr example) n intercnnectin prices but nt ther elements SMP Operatr Subsidiary f Internal Dminant firm External Dminant firm Cmp 2 Whlesale prices Internal transfer prices. 15. PRICE CONTROL AND COST ACCOUNTING OBLIGATIONS (ART. 13) Cntrl f cst recvery and price cntrls cvers (a) cst rientatin f prices and (b) cst accunting systems Aim: Prevent lack f effective cmpetitin, mnply rents and price squeeze Reasnable rate f return fr peratrs must be allwed: currently ranging frm 12% t 18% Benchmarking can be used (as tday) Burden f prf is n peratr NRA can use separate csting methdlgies NRA may require prices t be adjusted Descriptin f cst accunting systems shall be publicly available 16. FUNCTIONAL SEPARATION (ART. 13A) If ther remedies fail t achieve effective cmpetitin and that there are imprtant and persisting cmpetitin prblems and/r market failures identified in relatin t the whlesale prvisin f certain access prduct markets Regulatrs may use the exceptinal measure, in accrdance with the prvisins f the secnd subparagraph f Article 8(3), impse an bligatin n vertically integrated undertakings t place activities related t the whlesale prvisin f relevant access prducts in an independently perating business entity. That business entity shall supply access prducts and services t all undertakings, including t ther business entities within the parent cmpany, n the same timescales, terms and cnditins, including thse relating t price and service levels, and by means f the same systems and prcesses. Cmmissin must review Regulatrs prpsal including (a) (b) (c) evidence justifying the cnclusins f the natinal regulatry authrity as referred t in paragraph 1; a reasned assessment that there is n r little prspect f effective and sustainable infrastructure-based cmpetitin within a reasnable time-frame; an analysis f the expected impact n the regulatry authrity, n the undertaking, the electrnic cmmunicatins sectr as a whle, and n incentives t invest in a sectr as a whle, cmpetitin and any ptential cnsequential effects n cnsumers; (d) justificatin that this is the mst efficient means t enfrce remedies aimed at addressing the cmpetitin prblems/markets failures identified. Page 9(13)

10 The draft measure shall include the fllwing elements: (a) (b) (c) (d) (e) (f) the precise nature and level f separatin, specifying in particular the legal status f the separate business entity; an identificatin f the assets f the separate business entity, and the prducts r services t be supplied by that entity; the gvernance arrangements t ensure the independence f the staff emplyed by the separate business entity, and the crrespnding incentive structure; rules fr ensuring cmpliance with the bligatins; rules fr ensuring transparency f peratinal prcedures, in particular twards ther stakehlders; a mnitring prgram t ensure cmpliance, including the publicatin f an annual reprt. 17. LOCAL LOOP UNBUNDLING 17.1 Technical descriptin Lcal lps (cpper wires) were earlier used fr basic analgue vice telephny - tday it is pssible t carry bradband traffic ver cpper pairs. Alternatives t the existing cpper lps are cable r radi technlgies Physical access: Equipment is cnnected directly t the cpper pairs and this is used exclusively by the new cmpetitrs entering the market Bitstream access/shared access/whlesale bradband access: New entrant gains access t a defined bitstream n incumbent s lcal lp. Only this bitstream can be used. N ther equipment can be used t implement alternative bitstreams. The netwrk peratr (incumbent) manages the physical aspects f the lcal lp. High and lw bandwidth applicatins may be shared between different lcal access prviders (e.g. ne peratr may prvide basic vice telephny while anther may supply data services such as access t the Internet) Practical prblems Physical limits f the cpper pairs must be defined (i.e. the netwrk interface and the user interface), Page 10(13)

11 C-lcatin must be arranged, Interference (crss-talk) must be handled Respnsibilities f fr use and maintenance f equipment and cpper pairs 17.3 LLU bligatins n SMP peratrs Publish a Reference Offer (Art. 3 (1)) full unbundled access t lcal lps and shared access; Meet all reasnable requests fr bth types f access under transparent, fair and nndiscriminatry terms (Art. 3 (2)); Reasnable Request: "the access is necessary fr the prvisin f the services f the beneficiary, and that refusal fr the request wuld prevent, restrict r distrt cmpetitin in the sectr." Charge prices fr full unbundled access t lcal lps, fr shared access and fr related facilities n the basis f cst-rientatin (Art. 3 (3)). "Pricing rules shuld ensure that the lcal lp prvider is able t cver its apprpriate csts in this regard plus a reasnable return, in rder t ensure the lng term develpment and upgrade f lcal access infrastructure. Pricing rules fr lcal lps shuld fster fair and sustainable cmpetitin, bearing in mind the need fr investment in alternative infrastructures, and ensure that there is n distrtin f cmpetitin, in particular n margin squeeze between prices f whlesale and retail services f the ntified peratr Obligatins n NRA's Natinal regulatry authrities must: ensure that charging fr bth types f unbundled access sustains fair cmpetitin (Art. 4 (1)); be able t impse changes t the Reference Offer (Art. 4 (2)); be able t intervene n their wn initiative t ensure prvisin f unbundled lcal lps n fair, cmpetitive and nn-discriminatry terms (Art. 4 (2a)). Annex I sets ut a minimum list f items that must be included by ntified peratrs in the Reference Offer. Sft law: Independent Regulatrs Grup has published "Principles f implementatin and best practice regarding lcal lp unbundling". 18. REGULATING ACCESS TO FIXED NEXT GENERATION ACCESS NETWORKS (NGA) 18.1 Backgrund Recmmendatin f 20 September 2010 LLU regulatin is nt sufficient when incumbents transfrm their netwrks frm cpper based netwrks t NGA based n ptical fibre The recmmendatin aims at balancing between: prmting efficient investment in NGA and maintaining effective cmpetitin If n regulatin: There is a risk that new entrants that has invested based n the LLU regulatin, are nt able t cmpete against the incumbents NGA investment "Next generatin access (NGA) netwrks" means wired access netwrks which cnsist whlly r in part f ptical elements and which are capable f delivering bradband access services with enhanced characteristics (such as higher thrughput) as cmpared t thse prvided ver already existing cpper netwrks. In mst cases NGAs are the result f an upgrade f an already existing cpper r c-axial access netwrk. (Recmmendatin sectin 11) Page 11(13)

12 18.2 Technical descriptin 18.3 NGA and verview f pssible frms f access Surce: BR (11) 43 BEREC reprt n the implementatin f the NGA-Recmmendatin 18.4 Access t physical NGA infrastructure market 4 If SMP is fund in market 4 then the NRA shuld cnsider the fllwing principles when impsing remedies: 1. Access t civil engineering infrastructure f the SMP peratr - mandate access t civil engineering infrastructure at cst riented prices - reference ffer shuld be ffered, if requested - NRA shuld encurage, r blige, the SMP peratr t install sufficient capacity fr ther peratrs t make use f these facilities Page 12(13)

13 2. Access t the terminatin segment in the case f FTTH (Fibre t the hme) - mandate access t the terminating segment f the access netwrk f the SMP peratr, including wiring inside buildings 3. Unbundled access t the fibre lp in the case f FTTH - shuld mandate unbundled access t the fibre lp 4. Access bligatins in the case f FTTN (Fibre t the nde) - shuld impse an bligatin t f unbundled access t the cpper sub- lp 18.5 Whlesale bradband access t NGA market 5 If SMP is fund in market 5 then the NRA shuld cnsider the fllwing principles when impsing remedies: Whlesale bradband access ver VDSL as chain substitute Make new bradband access services available, at least 6 mnths befre the SMP peratr markets its wn crrespnding NGA retail service Whlesale bradband access shuld, in principle be cst riented 19. SUMMARY New regulatry package gives NRA mre flexible tls than tday and regulatrs must lifting existing bligatins if markets becme cmpetitive i.e. n SMP in a relevant market Strnger influence by the Cmmissin means mre harmnisatin but still NRA's have the primary respnsibility SMP cncept has changed and SMP peratrs are thse that have a dminant psitin (general cmpetitin law) Tlbx f Remedies which can be used t define bligatins n SMP peratrs cnsists f indirect measures NRA cntrls that SMP peratrs fllw internal bligatins n direct effect fr cmpetitrs (transparency and accunting separatin) direct measures SMP peratr s bligatins which frm rights fr cmpetitrs. Direct effect fr cmpetitrs (nn-discriminatin, access and use f.., price cntrl) Tlbx cnsists f the fllwing remedies: Retail level: Supply f leased lines Offering f carrier selectin Price cntrl n retail services Whlesale level: Access t and use f specific netwrk facilities (intercnnectin etc.) Transparency Accunting separatin Nn-discriminatin Price cntrl and cst accunting Functinal separatin Page 13(13)