31 July, 2015

RD 415 - ETNO comments on the Draft BEREC Report on Oligopoly Analysis and Regulation – BoR (15) 74

Download the full Reflection Document here.

Introduction

ETNO welcomes the opportunity to respond to the consultation on the draft BEREC Report on Oligopoly Analysis and Regulation (the “draft report”). 

ETNO’s views can be summarised along the following lines:

  • The current European regulatory framework for electronic communications should not be re-interpreted with a different notion of “collective dominance”;
  • The forthcoming review of the framework should be driven by the aim of substantially simplifying regulation, and should not be accompanied by a new tool to perpetuate regulation;
  • The electronic communications services sector shows high levels of competition and dynamism.

With this contribution, ETNO aims to outline its main concerns with regard to the draft report. The Association remains at BEREC’s disposal to discuss other aspects of the document, and to provide further clarifications.

1. Executive Summary

In ETNO’s view, the proposals outlined in the draft report fail to adapt to the economic reality of the electronic communications sector, and are aimed to facilitate the extension of ex-ante regulation beyond its original reach, instead of setting the path for a progressive removal of ex-ante supervision and the handover to competition law, as foreseen by the current framework.

BEREC’s approach calls for new triggers for regulatory intervention, with lower thresholds. In doing so, it runs the risk of opening the door to a substantial increase of regulation within the scope of the regulatory framework.

The concept of “tight oligopoly” paves the way to impose regulation in virtually all situations, even in absence of real competition problems. This approach would entail a substantial shift in the implementation of the current rules and a great increase of market uncertainty.

ETNO believes that broadening the scope of regulatory intervention, in addition to enhancing complexity, would be both ineffective and inefficient and would send a wrong message to investors.

In light of the above, ETNO considers that:

  • Under the current framework – The current standard of proof for joint dominance should not be questioned. 
  • For the future framework – The reasons outlined in the draft report to support the necessity of regulatory intervention in the case of “tight oligopoly” is flawed. The new concept of “tight oligopoly” rests on loose and discretionary criteria and does not reflect the reality of our sector.

In the electronic communications sector, ex-ante regulation – where needed – should foucs on the provision of access to the indispensable network input in order for competitors to be able to compete at retail level1. Once this has been addressed, it should be up to the market forces to determine the proper structure in each market.

A specific market structure should not constitute per se the trigger for ex-ante regulation. It should only be the result of the work of competitive forces. In the hypothetical case that this outcome raised competitive concerns, these should be addressed by the available general competition law tools, as is the case for any other sector.

In this context, ETNO warns against calls for an extension of the scope of regulatory intervention to situations characterised by the absence of single/joint significant market power (SMP). Instead, BEREC should clearly acknowledge that, in such situations, the spirit and foundation of the EU regulatory framework require the lifting of the relevant market’s ex-ante regulation. We refer herewith to the SMP guidelines where they emphasise that “a finding that effective competition exists on a relevant market is equivalent to a finding that no operator enjoys a single or joint dominant position on that market.”2.

It should also be considered that, in the absence of SMP, other provisions of the regulatory framework remain applicable and can answer many of the hypothetical concerns raised in the draft report (such as symmetric access to some inputs, general obligations of access and interconnection, switching and transparency obligations, etc.).

Policy-makers are increasingly reflecting on how to encourage significant additional investments in the deployment of Next Generation Access networks (NGA). In this context, ETNO calls upon BEREC to consider how to better assist in achieving this objective, namely through simplifying and ultimately lifting unwarranted regulation.

(...)

Conclusions

The draft report points to a set of competition concerns which are associated, in BEREC’s view, with the tendency to more concentrated markets and bundling. These trends, however, are strongly related to the high level of competition and dynamism towards which electronic communications markets have been evolving. The evolution of electronic communications markets is more and more characterised by strong development of alternative infrastructures in fixed markets, fixed-mobile convergence as a consequence of the complementarity of fixed and mobile services, and mobile-mobile mergers which aim to overcome artificially fragmented and unsustainable market structures.

At the same time, over the past years we have witnessed a clear trend of decrease in revenues and profits, while network capacity and traffic volumes have continued to grow. In the forthcoming review of the regulatory framework, policy-makers should carefully look at these trends, and particularly at the challenges in terms of network investment that the sector is facing, and find adequate regulatory solutions.

In ETNO’s view, BEREC should assist policy-makers in achieving the key goal of encouraging significant additional investments in the deployment of NGA, by simplifying and ultimately lifting unwarranted regulation. The forthcoming framework review should boldly aim at achieving these objectives.

In the context of this draft report, BEREC’s proposals should incorporate the objective of a progressive removal of ex-ante supervision and a handover to competition law to monitor and address possible competitive concerns, as already foreseen in the current regulatory framework.

However, the draft report points to the opposite direction, introducing a new concept of “tight oligopoly” which would pave the way to impose regulation in virtually all situations of current and future telecom markets. The document focuses on a particularly difficult and discretionary concept of “effective competition” to distinguish between “good” or “bad” oligopolies.

This approach would run the risk of increasing the overall regulatory burden of the sector, even in the absence of real competition issues characterised by the presence of single or joint significant market power in a given market. Moreover, introducing a new and vague trigger for ex-ante regulation would go against the principle of regulatory certainty and would send a negative signal to investors.

The existing high levels of competition in European electronic communications markets and the challenge of fostering the investment levels needed to deploy the new high-speed network infrastructure that Europe requires, point to the need of rethinking the current regulatory framework, with a substantial reduction of the regulatory burden of the sector, and a better recognition of the value of investments.

Download the full Reflection Document here.

***

[1] Along with other symmetric measures related to consumer protection (such as to facilitate switching and choice).

[2] EC 2002/C 165/03, rec. 19.

© ETNO 2024
Comfortable read mode Normal mode X