Regulatory Principles of NGA

Transcription

1 Regulatory Principles of NGA Cara Schwarz-Schilling WIK conference: Review of the European Framework Bonn, 24/25 April 2008 Ofcom

2 Main ERG Activities on NGN/NGA ERG Report on IP-Interconnection (published March 2007) Common Position on NGN Core/ IP-Interconnection currently being worked on Consultation of Draft CP intended after May ERG Plenary Final CP should be finalized after October Plenary ERG Common Position on Regulatory Principles of NGA (ERG (07) 16rev2) published in October 2007 in response to Commission s request including detailed guidelines to make the regulatory framework fit for the new challenges posed by NGNs Supplementary Document to NGA Opinion (ERG (07) 16rev2b) published in October 2007 after Athens Plenary containing the summary of the consultation as well as an updated description of the situation regarding NGA roll-out in the member states A Monitoring Report on the implementation of the ERG CP NGA will be completed by the end of 2008 Ofcom 1

3 ERG Common Position on Regulatory principles of NGA FttCab and FttH/FttB Scenario Economics of NGA Parameters determining profitability of NGA investment (e.g. cost, demand factors, population density) Incentives for efficient investment Regulatory Implications Market Definition and Analysis Market 1 and 2 Market 4 Market 5 Remedies for FttCab Scenario Remedies for FttH/B Scenario Procedural issues during the migration phase Ladder of Investment t in an NGA environment Ofcom 2

4 2S Scenarios considered d Fibre to the cabinet, which consists of a hybrid solution with DSL technology and fibre going to the street cabinet and copper between the street cabinet and the end-user. Fibre to the home which is a fully optical solution going to the end- user premises. Fibre to the building is included in this scenario even though, technically, it has to be considered a hybrid solution. Focused on Wireline NGA implementation i issues Ofcom 3

5 Access Architectures using Fibre FttCabinet FttBuilding SC DSLAM* MDF/ ODF SC ODF ONU copper subloop ducts fibre backhaul fibre backhaul FttHome (point to point ) FttHome (PON ) inhouse wiring SC ODF OLT inhouse wiring SC ODF OLT point to point fibre loop fibre backhaul point to point fibre loop passive PON splitter fibre feeder fibre backhaul Ofcom 4

6 Economics of NGA: Scale economies A mixture of technologies will be used for NGA deployment depending on a number of parameters and specific local characteristics, including copper local loop and sub-loop lengths, customer density and dispersion, the number of street cabinets per MDF. Increase in costs per line/user due to a lower No of end customers per node. Viability of the business case also depends on the demand side and additional ARPU that can be attained by offering customers innovative services. NGA investments are likely to reinforce the importance of scale and scope economies, thereby reducing the degree of replicability, potentially leading to an enduring economic bottleneck. Ofcom 5

7 CAPEX vs. total households/density (Source: Arcep) Ofcom 6

8 Ofcom 7

9 Economics of NGA: Diversity Economics of NGA networks are likely to vary across different technologies and different geographies, i.e. between MS and within MS. No one size fits all approach Implications for regulation Where a mix of different technologies and different regional characteristics across national territories leads to significantly different competitive conditions, the definition of sub-national markets may possibly be justified unless there is a common price constraint. Differentiation of remedies in a national market Ofcom 8

10 Economics of NGA: Incentives for efficient investment Regulators need to encourage efficient and timely investment in NGA networks Decision best taken by market parties Ensure that owner of an enduring economic bottleneck resource which is not replicable needs to be allowed an appropriate rate of return In case higher investment risk and price control obligation Fair and reasonable pricing Risk adjusted rate of return Differentiated WACC approach Promoting competition with a set of remedies and providing predictability by NRAs is the best incentive for efficient investment. Ofcom 9

11 Implications for regulation IRG/ERG considers existing ECNS Regulatory Framework principles remain suitable and allow NRAs to deal with the regulatory challenges of NGA roll-out provided certain adjustments are made. The general procedure of the ECNS foresees that the relevant market is analysed first after which a further analysis for the need of symmetrical regulation according to Art. 12 FD may follow. NRAs need to ensure transparency of intentions of markets players for NGA deployments to be able to provide a clear indication of the regulatory environment. The necessary information can be requested from operators by NRAs according to Art. 5 FD. ERG welcomes the proposed p strengthening. g Before the current access network is replaced by a NGA, the NRA has to ensure that an equivalent alternative has been determined and successfully implemented for those regulated wholesale-services that can no longer be provided in the NGA. Then phase-out joined by conditions can be foreseen. Ofcom 10

12 Regulatory challenges for market definition: Market 1-2 Developments towards an All-IP network will change current retail access product. Narrowband access will increasingly be replaced by broadband access products as broadband access combined with VoIP is a potential substitute for narrowband access to the public telephone network. In the presence of broadband retail offers, future decisions by NRAs may have to include broadband access where it passes the substitutability test (relevance of Naked DSL) IP networks used to provide public telephone service may be considered public telephone networks. Explanatory memorandum to Recommendation: NRAs should assess from a forward looking perspective the likelihood of increased substitution between narrowband and broadband particularly in member States where Naked DSL offers are available. Ofcom 11

13 Regulatory challenges for market definition: Market 4 Market 4 includes the fibre loop as has been suggested by ERG. A local loop can be defined as a dedicated line between the Network Termination Point at the subscriber ss premises and the (copper/optical) distribution frame at the first aggregation point (access at layer 1). FTTCab - the local loop consists of the copper line from the cabinet to the home; local loop unbundling can take place at the street cabinet; FTTB - the local loop consists s s of the copper line from the building entrance (where fibre ends) to the end-user premises; local loop unbundling can take place at or near the building; Ofcom 12

14 Regulatory challenges for market definition: Market 4 FTTH - the local loop would simply be constituted by optical fibre from the ODF to the end-user (home). in point-to-point solutions, it may be possible to unbundle the local loop in a manner very similar to that used today for copper full LLU of the loop is applied from the ODF; in a point-to-multipoint to solution (shared infrastructure topology, such as PON), it is no longer easily possible to associate a single physical element of connectivity with a particular end-user Shared Access Technology: ogy Wave Division Multiplexing as a way out? allows to divide optical light into wavelength Each wavelength could be dedicated to an end-user Ofcom 13

15 Regulatory challenges for market definition: Market 5 Bitstream products might need to be enhanced to allow the provision of high quality services. For all scenarios the access/handover can be at Ethernet or IP level (layer 2/3). Bitstream access at layers 2/3 reduces the freedom of the competitor to control quality parameters, compared to the LLU case, where the authorized operator gets access to the physical line (layer 1 access). Bitstream access at MDF may become e more important, but cannot be considered a full substitute for LLU. Market 5, no change in substance as it comprises all kinds of wholesale broadband access products. Ofcom 14

16 Regulatory challenges and remedies: FttCab The main barriers are Colocation at the street cabinet, Backhaul between the Street Cabinet and the operators networks. Street cabinet unbundling may become more important: Colocation at the street cabinet could be imposed as an ancillary service obligation to SLU, provided it is technically feasible Complementary products such as backhaul services in the middle mile from the cabinet to the operator s node and/or duct sharing may be needed: Backhaul could be considered: as an ancillary service to market 4; as a wholesale terminating segment of leased lines (market 6); or a separate backhaul market could be defined. Duct sharing could be imposed as an ancillary service to market 4. Ofcom 15

17 Regulatory challenges and remedies: FttH/FttB The main barriers are Civil engineering cost (horizontal barrier) and In-house wiring (vertical barrier) With fibre included in market 4 unbundling of the optical local loop could be imposed if SMP has been assessed in this market. Other possible wholesale products, e.g. duct sharing can be imposed Under SMP regulation as ancillary service on Market 4 or as direct remedy on a separate duct market on the SMP operator only Under Symmetric regulation on all operators based on Article 12 FD. Therefore it could be considered to clarify the basis for imposing an Art. 12 FD obligation for facilities sharing to encourage efficient NGA investment. Ofcom 16

18 Ladder of investment in an NGA environment The principle of promoting competition at the deepest level in the network where it is likely to be effective and sustainable is still appropriate for the regulation of enduring economic bottlenecks in NGA networks. NRAs will strive to maintain the level and balance of infrastructure competition achieved and pursue the movement up to the economically viable rung which may be vary across Member States and within member states depending on regional characteristics. If SMP operators reconfigure or phase out MDFs in the FttCab Scenario, the alternative operator can either climb up on the ladder by further investing to roll out fibre to the street cabinet (Scenario 1) or to the Home/Building (Scenario 2), or remain at the MDF or closest aggregation node using WBA. NRAs may have to adjust the access products to fit to the NGA hierarchy, potentially followed by a lot of movements of operators, the general concept of the ladder will stay in place. Ofcom 17

19 Ladder of investment in an NGA environment Duct / inhouse FTTH / FTTB + wiring sharing Own infrastructure level FTTCab unbundling Shared / full MDF unbundling + Backhaul / Backhaul Duct Backhaul sharing Bitstream Resale Ofcom 18

20 Update on BNetzA s NGA related Activities with regard to market analysis BNetzA decision on Unbundled Local Loop in June 2007 took account of fibre roll-out to street cabinets: Unbundling at MDF and Street cabinet Collocation at/in the street cabinet Access to ducts imposed as ancillary service to unbundling In case ducts are unavailable access to dark fibre imposed Obligation to supply information on the status of roll-out out to interested parties (not upheld in the decision of the Court of 1st instance, April 23rd) BNetzA started new round of market analysis a s for Bistream access (market 5) Data request to market parties send out end of March Ofcom 19