Commission decision concerning Case EL/2010/1130: wholesale broadband access - further details of price control remedy

Transcription

1 EUROPEAN COMMISSION Brussels, 14/10/2010 C(2010)7224 SG-Greffe (2010) D/16116 EΘΝΙΚΗ ΕΠΙΤΡΟΠΗ ΤΗΛΕΠΙΚΟΙΝΩΝΙΩΝ ΚΑΙ ΤΑΧΥ ΡΟΜΕΙΩΝ (EETT) Λ. Κηφισίας 60 GR Μαρούσι Greece For the attention of: Mr. Dr. Leonidas KANELLOS President Fax: Dear Mr Kanellos, Subject: Commission decision concerning Case EL/2010/1130: wholesale broadband access - further details of price control remedy Comments pursuant to Article 7(3) of Directive 2002/21/EC 1 I. PROCEDURE On 14 September 2009, the Commission registered a notification from the national regulatory authority of Greece, the Hellenic Telecommunications & Post Commission (EETT), concerning the details of the price control and cost accounting remedies imposed on the incumbent operator OTE in the market for wholesale broadband access in Greece 2. The national consultation 3 ran from 25 May 2010 to 2 July Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive), OJ L 108, , p. 33. Corresponding to market 5 of the Commission Recommendation 2007/879/EC of 17 December 2007 on relevant product and services markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, OJ L 344, , p. 65, (the Recommendation). In accordance with Article 6 of the Framework Directive. Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel

2 On 28 September 2010 the Commission sent a request for information to EETT 4 and a response was received on 5 October Pursuant to Article 7(3) of the Framework Directive, national regulatory authorities (NRAs) and the Commission may make comments on notified draft measures to the NRA concerned. II. DESCRIPTION OF THE DRAFT MEASURE II.1. Background The review of the market for wholesale broadband access was notified to and assessed by the Commission under case EL/2010/0935. At the time, EETT designated the incumbent OTE as an operator having significant market power (SMP) and imposed on it, inter alia, a price control obligation and a cost accounting obligation. In order to create incentives to new entrants to further climb the ladder of investment and to promote infrastructure based competition 5, EETT considered that the cost-based pricing for local loop unbundling (LLU) was not sufficient to guarantee consistency between wholesale line access (WLA) and wholesale broadband access (WBA) prices. EETT argued that WBA prices should not become so advantageous for new entrants that this would create a disincentive to invest in LLU. WBA prices should rather correspond to the cost of a new entrant in the market, whose strategy of expansion is based on LLU access. Therefore, according to EETT's decision, the control of the economic space between WBA and WLA prices must be included in the scope of the price control obligation. Hence, in its decision EETT anticipated the need to build a technical-economic model in order to set the appropriate economic space. II.2. The notified draft measure The current notification concerns the technical-economic model for monitoring the economic space between WBA and WLA tariffs. In EETT's view the model is designed to take account of two main requirements: on the one hand the economic space shall be wide enough to avoid eviction pricing and not to impede competitors' investments in alternative infrastructures; on the other hand it shall not be too wide to avoid excessive pricing, especially in those geographic areas where there is no alternative to OTE's bitstream products. In building the model, EETT adopted a dynamic approach, which takes into account national circumstances and market evolution, including the level of competition and broadband access penetration, the level of unbundling and its expansion prospects. EETT will update the model and the corresponding data at least on an annual basis through collecting alternative operators' data and performing the annual cost audit 6. The model consists of three sub models: (i) the WLA cost sub-model; (ii) the transmission cost sub-model; and (iii) the WBA cost sub-model. In order to define the Pursuant to Article 5(2) of the Framework Directive. According to the last market analysis, the possibility to provide broadband access via LLU exists in 152 urban centres that cover 65% of the population, while in the remaining centres the basic offer of broadband access provision at wholesale level is the wholesale broadband access offer of OTE. EETT will also update the model in case the incumbent introduces modifications to the offered services. 2

3 economic space, the sum of the unit cost of the WLA and of the transmission cost is compared to the unit cost of the WBA. The first sub-model estimates the cost of access to the local loop to serve a household user 7. It includes a model of network access and a complete analysis of the individual cost groups 8 estimated for a reasonably efficient alternative operator 9 with a given customer base and technical equipment. 10 The second sub-model concerns the costs faced by a reasonably efficient operator when concentrating broadband traffic from each co-location to a central point of presence. The elements included in the costs are: (i) trenches; (ii) ducts and fibre cables within the trenches; (iii) concentration network; (iv) peripheral transmission rings; (v) main transmission rings; and (vi) IP network nodes. The third sub-model concerns the cost of a wholesale broadband access (ARIS system) 11 line for residential customers, including activation fee, monthly fees, and deactivation fee. In order to define the economic space the model will compare the cost of access to the local loop plus the cost of the transmission network with the cost of accessing an ARIS line. The comparison will be made for each urban centre where co-location is offered. In particular it is examined whether on the basis of the current WLA and WBA prices, a reasonably efficient new operator will opt to provide services through WLA in an adequate number of urban centres whilst in the smaller urban centres the provider would opt to provide services using WBA. In case the resulting economic space will be considered as not adequate (too wide or not wide enough) EETT will adjust tariffs accordingly. In order to adjust tariffs EETT will compare the current economic space to the one of the previous year and consider the relevant market evolution as regards, for example, cost of components, technologies, economies of scale, which can be achieved by a reasonable efficient operator, and LLU roll out. III. COMMENTS On the basis of the present notification and the additional information provided by EETT, the Commission has the following comments 12 : The model does not include the cost of providing services to large corporate clients. In detail: the costs for (i) OTE local loop access (full and shared); (ii) co-location site access and (iii) DSLAM bought by an operator. The estimation of the modelled operator's market share will be based on the calculation of the economies of scale that could be achieved by a reasonably efficient operator, taking into account market dynamics and competition. The current version of the model does not include fibre services given the fact that they are not included in the markets for wholesale (physical) network infrastructure access and wholesale broadband access. EETT explains in the reply to the RFI that when NGA services will be included in the market definition in the next round of market analysis the model will be adapted accordingly. The ARIS (asymmetric rate connection) service of OTE provides to telecommunications service providers asymmetrical rate connections between the ADSL modem s connection point (on the premises of the end-user) and the corresponding BRAS broadband access network of OTE. It is used for transferring traffic to and from the Internet. In accordance with Article 7(3) of the Framework Directive. 3

4 Lack of transparency and legal certainty for market players The Commission would like to point out that a consistently applied costing methodology for both LLU and WBA usually guaranties an economic space that provides efficient investment incentives. The economic space between LLU and WBA should therefore be analysed together with the costing methodologies applied to establish the price of these access products. When considering the economic space between WLA and WBA, EETT explains that it will assess whether on the basis of the current WLA and WBA tariffs a reasonably efficient operator will opt to provide services through WLA in an adequate number of urban centres (i.e. where exchanges can be unbundled), whereas in the smaller urban centres it would opt instead for providing services using WBA. However, the draft measure does not specify what is meant by an adequate number of urban centres and, as a consequence, it is not clear from the draft measure under which circumstances EETT considers the economic space to be sufficiently large. Furthermore, EETT refers to additional criteria (e.g. last year's economic space, and the relevant market evolution) it intends to take into consideration when adjusting tariffs, and the possibility to adjust the post audited tariffs in case the identified economic space is not adequate. The Commission observes that it is not specified in the draft measure how the additional criteria mentioned above will be used for the adjustment of tariffs. It is also not specified in the draft measure on which tariff (i.e. WBA or WLA) EETT intends to intervene. In this respect, the Commission would also like to stress that some of the criteria used for the adjustment of tariffs referred to by EETT have apparently already been taken into account at the stage of modelling and that it is unclear whether their inclusion also at the tariff adjustment stage is appropriate. The Commission considers, based on the information available, that EETT's proposed measure lacks transparency and is not likely to provide legal certainty for market players. Therefore, the Commission would like to invite EETT to clearly specify in the final measure the criteria for the evaluation of the adequacy of the economic space and tariff adjustments, and the consequences of this evaluation on the cost oriented tariffs of WBA and WLA services. In this respect the Commission reminds EETT that the principle of cost orientation for both access products should be respected. Pursuant to Article 7(5) of the Framework Directive, EETT shall take the utmost account of comments of other NRAs and the Commission and may adopt the resulting draft measure and, where it does so, shall communicate them to the Commission. The Commission s position on this particular notification is without prejudice to any position it may take vis-à-vis other notified draft measures. Pursuant to Point 15 of Recommendation 2008/850/EC 13 the Commission will publish this 13 Commission Recommendation 2008/850/EC of 15 October 2008 on notifications, time limits and consultations provided for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, OJ L 301, , p

5 document on its website. The Commission does not consider the information contained herein to be confidential. You are invited to inform the Commission 14 within three working days following receipt whether you consider that, in accordance with EU and national rules on business confidentiality, this document contains confidential information which you wish to have deleted prior to such publication 15. You should give reasons for any such request. Yours sincerely, For the Commission, Robert Madelin Director-General Your request should be sent either by or by fax: The Commission may inform the public of the result of its assessment before the end of this three-day period. 5