Analysing consumer broadband markets in the NGA transition Ilsa Godlovitch

Transcription

1 Analysing consumer broadband markets in the NGA transition Ilsa Godlovitch Implementing the New Recommendation on Relevant Markets 18 November 2014, Brussels 0

2 Broadband markets: from old to new Market 4 Wholesale (physical) network infrastructure access Including shared or fully unbundled access at a fixed location Market 5 Wholesale broadband access Non-physical/virtual netwiork access including bitstream Residential Business Market 3a Wholesale Local Access at a fixed location Market 3b Wholesale central access provided at a fixed location for mass-market products Market 6 Wholesale terminating segments of leased lines, irrespective of technology used to provide leased or dedicated capacity Market 4 Wholesale high-quality access provided at a fixed location 1

3 Changes in emphasis Subtle, but important changes to approach In Wholesale Local Access market (3a): Greater flexibility concerning passive and active approaches to suit national circumstances Market may encompass any or all of duct access, SLU, LLU, VULA, ODF access For virtual products, key in market inclusion is whether they have the potential to offer equivalent functionality to physical access - localness and flexibility of product In downstream market 4b Wholesale Central Access: Covers only mass-market ( low quality ) bitstream ( high quality in new market 4) Implication that WCA bitstream is regional and less flexible (layer 3?) Clear signal FOR geographic segmentation and deregulation where upstream competition via cable and/or local access eventual phase-out? 2

4 Consumer broadband the virtual NGA value chain Source: WIK Wholesale local access (3a) Wholesale central access (3b) 3

5 Finding the appropriate balance between passive and active broadband remedies for SMP in market 3a (WLA) NGA developments Existing incumbent NGA deployment Strong cable (coverage and take-up) Weak cable (coverage or takeup) Stay on ladder VULA (for FTTC/FTTH PON) Fibre LLU (for FTTH P2P)? Limited existing cable/fttx NGA deployment Scale access-based entrants and/or regional players? Move up ladder Duct access SLU Symmetric FTTP sharing? Approach to broadband regulation may be more varied than in the past, because starting points across and within countries are more diverse Scale of access-based entrants previous success of LLU Strength of cable coverage and take-up (Italy, Greece vs NL, Belgium) Presence of regionalised access players (eg Germany, France) Key factor in assessing remedies is whether moving up ladder is viable 4

6 EU experience on consumer broadband (1): Hanging on the ladder evolution of unbundling Many countries place primary focus on protecting/promoting competition at the current position on the ladder of investment Often in these cases, existing NGA deployments from cable and/or incumbent make the business case for further access infrastructure weak Countries with ongoing incumbent FTTC/VDSL and/or FTTH PON deployment have typically focused on VULA or NGA bitstream as core remedy UK, Belgium, Ireland, Austria, Denmark, Germany Currently different market approaches (Market 4 vs market 5) and product definitions - Localness, flat or tiered pricing/speeds, contention Further alignment of product definitions to be expected with new market 3a? Countries with FTTH P2P deployment have mandated fibre unbundling/odf access Sweden, Netherlands, Slovenia VULA as complement if/where FTTC deployed or LLU becomes unfeasible (2014 proposals in Sweden, Netherlands) 5

7 EU experience on consumer broadband (2): Opposing approaches to FTTC The NGA migration has resulted in diverse approaches to infrastructurebased competition in FTTC via SLU Certain countries have placed a degree of focus on a move up the ladder of investment to FTTC based on SLU either across territory or in rural areas In Italy, Fastweb has installed VDSL in cities on the basis of SLU absence of cable may have supported business case In Germany and France, SLU has been used inter alia to support rural deployments, in some cases with the support of state aid In these countries SLU co-exists with other remedies active NGA remedies in Germany and Italy, symmetric terminating segment in France. Not sole solution Other countries have waved the SLU obligation in anticipation of VDSL vectoring which creates cross-talk issues for SLU-based competition Phase-out of SLU in Belgium, Netherlands, Ireland. Potentially also justified by lack of demand/viability 6

8 EU experience on consumer broadband (2): Up the ladder to FTTP - symmetric/passive Certain countries have placed focus on move up the ladder of investment to end-to-end FTTP competition Physical remedies with focus on deep passive (duct access, symmetric access to in-building wiring/terminating segments) ARCEP has focused SMP regulation for NGA on making duct access effective. Fibre is governed by a symmetric regime for sharing (co-financing) of the FTTH terminating segment which is set at a point aggregating 1,000 households (outside dense areas) CNMC (Spain) and ANACOM (Portugal) have focused on SMP duct access and symmetric access to in-building wiring Lighter or no regulation of downstream NGA wholesale products No regulation of active NGA products in France and Portugal, limited to 30Mbit/s in Spain Deep passive approach is inherently cross-market impacts leased lines ARCEP conducted simultaneous analysis of former markets 4-6 7

9 Interplay between SMP measures in WLA market and symmetric rules Rights of way Symmetric duct access and in-building wiring SMP duct access Symmetric fibre terminating segment sharing SMP local access regulation In future, SMP regulation and extended terminating segment regulation (to distribution point) should be considered in context of generalised duct and in-building wiring obligations + improved rights of way under 2014 Directive on broadband cost reduction If these measures alone would result in effective competition, no additional rules needed in theory To date, countries with deep NGA infrastructure competition (eg France, Portugal, Spain) have relied on SMP (not symmetric) duct rules. Necessary for strong remedy specification? UK proposing to rely on symmetric duct rules alone for business access. Appropriate if likely demand for duct access limited or if significant potential from nonincumbent passive infrastructure eg utilities, sewers? 8

10 Competitive outcomes contrasting approaches Portugal: NGA networks in Portugal (end 2013) Source: ANACOM, presentation March 2014 Strong focus on duct access and in France terminating fibre segments has yielded NGA infrastructure competition of 3+ in some areas What will final map look like? Recent merger developments Sufficient for nationwide competition? NGA competition slow to emerge in active (VULA) regimes Product specification? Question of time? 9

11 Wholesale Central Access some considerations Downstream of wholesale local access Distinction of residential from business (as in Austria, Netherlands, France) Requires consideration of what constitutes a mass market bitstream connection, and how bitstream might differ from VULA Some potential distinguishing features: Regional connectivity (fewer aggregation points) Asymmetric capacity lower speeds? Over-booking: higher contention ratios than business Residential-grade SLA (eg slower/working hours repair) Capable of TV delivery (multicast capabilities) Geographic segmentation and deregulation should be considered where: Strong upstream competition from cable and/or local access-based competitors UK ( % deregulated), NL, Austria (deregulated influenced by fixed mobile substitution), Sweden (Oct 2014 proposals for full deregulation), Germany (2014 proposals for geographic segmentation) 10

12 Implications for the single market? The new Recommendation appears to support diversity regarding the choice of remedies for wholesale local access and greater acceptance of virtual solutions This stems from objective developments in the migration to NGA (diverse architectures, market structures), but what implications might this have for the single market? Trend from single physical remedy (LLU) to more diverse (often virtual) offerings In countries where focus is on moving up the ladder, balkanisation of supply Increased transaction costs for residential broadband access providers? Decreased scope for nationwide or transnational supply? Draft Connected Continent Regulation put forward case for harmonised virtual access products including VULA and IP-bitstream Where VULA and IP-bitstream are warranted under SMP, state aid or merger rules, makes sense to have common interpretation Scope to encourage commercial standardisation in other cases? 11

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