By Alessandro Mauro
To submit comments and updates: alessandro.mauro@telecomitalia.it
EU 2020 Strategy and the Digital Agenda
The European Council approved in 2010 the "Europe 2020 Strategy", a far-reaching strategic plan adopted to reach specific target in several fields, in order to stimulate the economy and improve the citizens' conditions. Member State adopted national targets in each of these areas.
One of the initiatives of "Europe 2020" is the Digital Agenda, which contains the following targets as far as the broadband coverage is concerned:
- 100% broadband coverage by 2013;
- increase coverage bandwidth to 30 Mbps for all Europeans by 2020;
- 50% or more of European households subscribing to internet connections above 100 Mbps by 2020;
The Telecom Package
In late 2009, the European Parliament approved the reform of EU rules in the telecommunications sector, which aims at strengthening the telephone and internet customers rights and to encourage competition among telecom operators. The Parliament and the Council already agreed in May 2009 on two parts of the "Telecom Package" (citizens' rights and telecommunications authorities), approved by the Parliament on May, 6th and by the Council on October, 26th.
Telecom Package main news:
- The functional separation as a mean to solve the competition problems: the NRAs where the remedies adopted failed to achieve effective competition, can impose as an exceptional measure the functional separation of vertically integrated network operators. The activities related to the wholesale provision of relevant access products will be placed in an independently operating business entity. Nevertheless, the ownership of the access division and of the network will not be modified.
- The new Body of European Regulators for Electronic Communications (BEREC): formed by the 27 NRA, it will help ensuring a fair competition and a greater consistency of regulation in the telecommunications markets. The BEREC, however, does not assume any responsibility on networks and information security, as originally proposed the Commission, which wanted to merge the existing European Agency for Networks and Information Security Agency (ENISA) with the new body. The European Commission will then have the power to oversee the regulatory measures proposed by the NRAs in order to avoid regulatory inconsistencies which could distort competition; it also requires NRAs to consult the Commission and the same BEREC before taking regulatory decisions.
- Sub-national markets: The package also introduces new regulatory tools for the NRAs which could define sub-national markets and decide, for example, the non-application of legal requirements in certain geographical areas where effective competition on the infrastructures exists.
- Radio Spectrum: New rules for radio spectrum too, in order to ensure a coordinated and harmonized use at European level and to utilize its full potential especially in the transition (switch off) from analogue to digital, scheduled for 2012 . Any frequency band may be assigned to any service based on any technology. Thus, for example, a band currently used for broadcasting in the future could be used to provide wireless broadband services.
- NGN: competition and investments in next generation access networks based on new optical fibre and wireless network technologies are encouraged.
- Network sharing: According to the new package, the NRAs can impose to operators to share their networks. Companies that have the right to install facilities on public or private property or above or below them, can be imposed, for example, to open to competitors towers, ducts, street cabinets, etcetera.
- Broadband access: It speeds up access to broadband for all the Europeans citizens: at the moment, in rural areas only 70% of the population on average has access to a broadband network connection. The new rules will also ensure to consumers a wider range of broadband services providers in competition with each other to choose from.
NRAs, where the remedies adopted failed to achieve effective competition, can impose as an exceptional measure the functional separation of vertically integrated network operators.
The main provisions of the Telecoms Package are the following:
- Directive 2009/136/EC, amending the Directive on Universal Service (Directive 2002/22/EC), the "Privacy Directive" (Directive 2002/58/EC) and Regulation on cooperation between National Authorities (Regulation (EC) 2006/2004);
- Directive 2009/140/EC, amending the Framework Directive (Directive 2002/21/EC), the Access Directive (Directive 2002/19/EC) and the Authorisation Directive (Directive 2002/20/EC );
- Regulation (EC) No 1211/2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office.
BEREC public consultation on functional separation
In October 2010 the BEREC launched a public consultation aimed at providing guidance for the NRAs to be used when considering the appropriateness and the implementation of functional separation (reference is made in particular to Articles 13a and 13b of the Access Directive). In the document, separation experiences like those adopted in the UK, in Italy, in Sweden and in Poland are considered useful examples to take into consideration; nevertheless, they matured in a different regulatory context:
"All the above voluntary arrangements did not derive from the application of the EU Framework. They were rather linked to the specific situation of the incumbent operator and the national market. Moreover, they came about as a result of different legal contexts. However, since they were submitted from incumbents to NRAs as voluntary undertakings and resulted in functional separation of access network assets, we believe they may provide useful examples."
In the final document which followed the public consultation, the BEREC highlighted that the NRAs should carefully assess all the impacts on the market and on the industry as a whole of a forced functional separation of the access network of the incumbent Operator.
The Commission Recommendation on NGAN
In September 2010, following a lengthy approval process, the Commission adopted a Recommendation that will regulate access to future next generation networks. The definition of a common framework for what concerns the access to new fiber optic networks is particularly important in view of the fact that, although the development of NGN networks is still at an early stage, in several Member States problems of various kinds are emerging; as the intervention of the Commission was called several times, in order to obviate the risk posed by the proliferation of multiple and varied responses, the Commission has therefore established a common regulatory framework that can serve as a stimulus to investments.
Particular attention was paid to the delicate question of the balance between the need to safeguard competition on one hand and the need to encourage investments by the operators on the other hand; for example, a risk premium for its investments was recognized to the incumbent within the definition of access prices, while the entry of new operators in the market has been strongly supported.
Specifically, in order to encourage sector investments, prices should fully reflect the risk associated to each investment; at the same time, the national regulators must have at their disposal a full range of access remedies to choose from in order to promote the entry of alternative operators.
Co-investments are strongly supported by the Commission, while has been made clear that the ex-ante regulation should reflect the peculiarities of local markets (eg urban or rural).
"The fact of whether an SMP operator deploys a point-to-multipoint or point-to-point network topology should not as such affect the choice of remedies, keeping in mind the availability of new unbundling technologies to deal with potential technical problems in this respect."
The Commission public consultation and the draft Recommendation on Non Discrimination and costing methodologies
In 2011 the Commission published two public consultations on:
- The application of the non discrimination principles in the electronic communications access networks (Non Discrimination Obligation Under Article 10 Of The Access Directive, including Functional Separation Under Article 13a);
- The identification of the costing methodologies for the calculation of the wholesale access prices (Costing Methodologies For Key Wholesale Access Prices In Electronic Communications).
The consultations will be followed by a Recommendation which aims at avoiding the fragmentation stemming from the different approaches all over Europe on these issues: in particular, "the lack of clarity regarding the application of a non-discrimination obligation resulting from the divergence in regulatory approaches across Member States has led to a situation where a number of stakeholders have asked the Commission to clarify its position and expectations in this respect. Furthermore, some national regulators are considering making use of the new powers to mandate functional separation and are seeking assistance from the Commission as to the precise circumstances in which such a remedy can be used."
In December 2012 the Commission asked BEREC and COCOM opinions on the draft Recommendation on non-discrimination obligations and costing methodologies.
- Exemption from cost-oriented wholesale access pricing for NGA networks is granted provided that Equivalence of Inputs is guaranteed;
- In the period while Equivalence of Inputs is being implemented, at least the technical replicability should be ensured: NRAs should test the technical replicability before the launch of a new retail offer by the SMP operator;
- Margin squeeze test will be performed in order to avoid distorsion of competition;
- NRAs should implement by 2016 a BU LRIC+ (LRIC plus a mark-up for the recovery of common costs) cost model;
- The monthly copper local loop unbundling fee should be in a range between €8 and €10 (in 2012 prices).
Commission public consultation on the revision of the Recommendation on Relevant Markets
In October 2012 the Commission published a public consultation on the revision of the Recommendation on Relevant Markets; the Recommendation (Recommendation 2007/879) contains seven markets (one retail and six wholesale); the goal is to adapt such a list with the latest technical and market evolutions.
Commission Public consultation on Net Neutrality
The European Commission launched a public consultation in 2010 regarding the net neutrality "principally focused on the behavior of operators, and in particular how they may manage traffic"; in the 2011 final document the Commission did not expressed specific guidelines as it considered better to wait for the new regulatory framework to be transposed into national laws before defining a more consistent approach.
BEREC too published a public consultation on net neutrality. In 2012 it published guidelines on several topics, including Quality of services, IP Interconnections, traffic management policies, etc..
The Commission and BEREC initiatives on cost reductions for NGAN implementation
In April 2012, the Commission published a consultation on best ways to obtain cost reductions in implementing NGAN, with particular reference to the costs of civil works, which represent 80% of total costs.
In May 2012, the BEREC published the results of its public consultation concerning the identification of the possible effects that co-investment policies between operators may have on the competitiveness of the market as far as the NGAN roll-out is concerned.
The Italian experience of Trentino NGN and the Province of Lucca were mentioned; in the Province of Lucca, for instance, Telecom Italia - identified as private partner - and the Province itself signed an agreement for the construction of fiber network in the industrial district of the area.
State aid policies for NGAN
Between 2011 and 2012 the Commission issued two public consultations to start the process of revision of the Community guidelines on State aid for the development of broadband networks.
In December 2012, the Commission adopted the text that will change the previous rules.
The new proposed guidelines do not differ significantly from those already in place.
However, it is possible to note some significant changes, for example with regard to the inclusion of wireless networks "capable of delivering reliable high-speeds" among the networks that can enjoy state aid. In addition, under certain conditions such state aid may be obtained for ultra-fast networks also in those areas characterized by a good competition at infrastructures level (black areas).
BEREC public consultations for the revision of the Common Positions on non discrimination
In 2012 the BEREC started the process to update its common positions on fixed access regulation. Several are the topics faced in the process. As far as the non-discrimination is concerned, a public consultation was published. The Principle 3 of the Common Positions deals with the forms of Equivalence which the NRAs choose as more apt (Equivalence of Inputs or Equivalence of Outputs): the document stressed that "in Italy, under Equivalence of Output, exactly the same upstream input is provided by Telecom Italia to its downstream arm and alternative operators, although some business processes or operational support system might not be identical.Over time however they will likely converge or became identical."
NRAs should consider imposing functional separation only when all other regulatory obligations have failed (Principle 4).
In september 2012 the BEREC published the results of the public consultation; the following paragraph on the issue of "equivalence" is worth mentioning: "BEREC views the achievement of equivalence as an important competition objective and further believes that NRAs are best placed to determine the exact application of it on a product-by-product basis. (...) a strict application of Equivalence of Input is most likely to be justified in those cases where the incremental design and implementation costs of imposing it are very low (because equivalence can be built into the design of new processes) and for certain key legacy services (where the benefits are very high, despite the material costs of retro-fitting Equivalence of Input into existing business processes). In all other cases, Equivalence of Output would still be a sufficient and proportionate approach to ensure non-discrimination".