new approach to regulation of fixed and mobile networks
TRANSCRIPT
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New approach to regulation of fixed
and mobile networks
Relevant Markets International Forum of CRC:
„Challenges of the Relevant Market Regulation
for Telecommunications Networks and Services“,
Bogota, 15 June 2012
Dr. Ulrich Stumpf
1
Overview
1. Why review ex ante regulation of fixed and
mobile networks?
2. How adapt ex ante regulation of dominant
operators?
3. Give symmetrical ex ante regulation greater
emphasis?
A European perspective
2
1. Why review ex ante regulation of
fixed and mobile networks?
3
Ex ante regulation must be adapted to multiple
technological & commercial developments
LTE
networks
Ultrafast Internet
access connections
New applications and
services (e.g. IPTV, OTT)
Partial convergence of
fixed & mobile services
Differentiation of
residential & business-
graded services
Widespread bundling
of services
DOCSIS 3 upgraded
cable networks
Unbundled access to
VDSL & fibre networks
Wholesale broadband
access to VDSL & fibre
networks
RETAIL SERVICES NETWORKS WHOLESALE SERVICES
IP
interconnection
Investment incentives Competition Access remedies
VDSL & fibre
access networks
NGN
core netwoks
Ethernet based
dedicated capacity
Migration to NGN/NGA
wholesale services
Migration to NGN/NGA
networks
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2. How adapt ex ante regulation
of dominant operators?
Regulated markets/operators
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1. Targeted at competition problems related to dominance
2. Limited to electronic communications markets
characterised by
Persistent barriers to entry
No tendency towards effective competition
Ex post application of competition law alone not sufficient
3. No regulation at retail level if wholesale regulation is
enough
Focus on, and principles of, ex ante regulation
of dominant operators remain untouched
6
Current ex ante regulation of dominant operators
concentrates on voice & broadband access
Retail
fixed
access
Transit
Fixed call
termination
on individual
networks
Retail
fixed
calls
Mobile
access &
call
origination
Retail
mobile
access &
calls RE
TA
IL
WH
OL
ES
AL
E
Retail fixed
broadband
Internet
access
Retail
dedicated
capacity
Retail mobile
broadband
Internet
access
Trunk
segments of
wholesale
dedicated
capacity
BROADBAND ACCESS VOICE
RE
TA
IL
WH
OL
ES
AL
E
Fixed
call
origination
Wholesale
broadband
access
Unbundled
local loop;
duct access
Wholesale
Internet
connectivity
Terminating
segments of
wholesale
dedicated
capacity
Mobile call
termination
on individual
networks
Regulated market = Market susceptible to ex ante regulation and characterised by SMP
Unregulated market
No related
wholesale
markets
defined
No related
wholesale
markets
defined
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Ex ante regulation for voice can be reduced
1. New retail market boundaries for voice
Fixed access & calls a bundle (voice)
VoIP a substitute for voice over PSTN
Mobile voice a partial substitute for fixed voice (residential
customers)
Differentiation of business from residential services
2. Retail voice markets competitive subject to regulation of
call termination on fixed & mobile networks
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Ex ante regulation for broadband
access must be maintained
1. New retail market boundaries for broadband Internet
access
Ultrafast broadband (fibre/VDSL/DOCSIS3) a chain substitute for
standard broadband (ADSL)
LTE a substitute for fixed broadband access, where enough
capacity (residential customers)
Differentiation of business-graded services (faster/more reliable,
multi-site) from residential services
Convergence of business-graded broadband access and
dedicated capacity
9
Ex ante regulation for broadband
access must be maintained
2. Platform competition alone is not effective, except in few
countries (Romania with lots of overground wiring)
10
Ex ante regulation for broadband
access must be maintained
3. Usually, retail broadband access markets will only tend
towards competition subject to continued wholesale
regulation
Unbundling of fibre and VDSL networks and, where not technically
or economically feasible, virtual local access
Wholesale broadband access (except possibly for residential
customers)
Terminating segments of wholesale dedicated capacity
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Bundling may require new ex ante regulation
1. Longer term trend towards separate retail markets for
bundles (are we already there?)
Voice
Fixed broadband
Internet access
TV/OTT
Mobile
Voice
Fixed broadband
Internet access
Dedicated capacity
Mobile
RESIDENTIAL BUNDLES BUSINESS BUNDLES
2. Need to regulate wholesale access for all components?
STA
ND
AR
D,
SIN
GL
E-S
ITE
GR
AD
ED
, MU
LT
I-SIT
E
12
2. How adapt ex ante regulation
of dominant operators?
Regulatory measures
13
WH
OL
ES
AL
E
Wholesale
broadband
access
Unbundled
local loop;
duct access
Terminating
segments of
wholesale
leased
lines
LRIC+ or
FDC
LRIC+ or
FDC
Retail
fixed
access
Retail
fixed
calls
Retail
mobile
access &
calls
Retail fixed
broadband
Internet
access
Retail
dedicated
capacity
Retail mobile
broadband
Internet
access
Fixed
call
origination
Retail
fixed
access
Fixed call
termination
on individual
networks
RE
TA
IL
WH
OL
ES
AL
E
RE
TA
IL
Fixed
call
origination
Mobile call
termination
on individual
networks
LRIC+
LRIC+ and
asymmetric
LRIC+ and
asymmetric
FDC or
price cap
BROADBAND ACCESS VOICE
În the past, most ex ante regulation included
cost oriented prices based on LRIC+ or FDC
LRIC+ or
FDC or
retail-minus
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To avoid overcompensation,
wholesale charges need to be reviewed
Cost orientation to be based on efficient networks (the
Modern Equivalent Asset)
Fixed and mobile call termination: NGN
Unbundling: Fibre access
Wholesale broadband access: Fibre access/NGN
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To avoid overcompensation,
wholesale charges need to be reviewed
Cost orientation to be based on LRIC
Fixed and mobile call termination: Pure LRIC in EU, but non-EU
countries may go for LRIC+
Fibre unbundling: LRIC+
Copper unbundling: LRIC+ of fibre less performance delta between
fibre and copper
Wholesale broadband access: LRIC+ or retail-minus
Glidepath to target levels
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To avoid foreclosure, bundles need
to be tested for margin squeezes
1. Margin squeeze tests for individual products alone do not
allow to capture margin squeezes on bundles
2. Need to test bundles for margin squeezes ex ante
3. A competitor should be able to cover the costs of
wholesale inputs plus its own downstream costs
4. Downstream costs of a reasonably efficient competitor
versus equally efficient competitor?
17
Current ex ante regulation of dominant operators
includes non-discriminatory terms of access
Fixed
call
origination
Retail
fixed
access
Fixed call
termination
on individual
networks
RE
TA
IL
WH
OL
ES
AL
E
RE
TA
IL
WH
OL
ES
AL
E
Wholesale
broadband
access
Unbundled
local loop;
duct access
Terminating
segments of
wholesale
leased
lines
Mobile call
termination
on individual
networks
BROADBAND ACCESS VOICE
Non-discri-
mination Non-discri-
mination
Non-discri-
mination Non-discri-
mination
Non-discri-
mination
Non-discri-
mination
Retail
fixed
calls
Retail
mobile
access &
calls
Retail fixed
broadband
Internet
access
Retail
dedicated
capacity
Retail mobile
broadband
Internet
access
Non-discri-
mination
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To avoid foreclosure, non-discrimination needs
to be implemented much more effectivley
1. Unbundling, wholesale broadband access, terminating segments
Need to ensure equivalence of access, including in delivery & fault repair
Functional separation as a measure of last resort
2. Transmission of third-party VoIP and other retail applications
Need for minimum quality standards against blocking/throttling
3. Call termination and IP interconnection
Discrimination less of a concern where there is reciprocal traffic exchange
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2. Give symmetrical ex ante
regulation greater emphasis?
20
Past symmetrical ex ante regulation focused on
transparency & end-to-end connectivity
Retail
dedicated
capacity
Retail
fixed
access
Fixed call
termination
on individual
networks
RE
TA
IL
WH
OL
ES
AL
E
RE
TA
IL
WH
OL
ES
AL
E
Mobile call
termination
on individual
networks
BROADBAND ACCESS VOICE
End-to-end
connectivity
End-to-end
connectivity
Retail
fixed
calls
Retail
mobile
access &
calls
Transparency,
number
portability
Transparency,
number
portability
Transparency
Retail mobile
broadband
Internet
access
Transparency
Retail fixed
broadband
Internet
access
Transparency
Symmetrical regulation
No symmetrical regulation
21
Symmetrical ex ante regulation provides a
complementary instrument to promote a
variety of objectives
1. Ensure interoperability of services and end-to-end
connectivity
2. Address market power independent of dominance
3. Avoid economically inefficient or physically impracticable
duplication of access infrastructure to end-users
4. Promote net neutrality
5. Raise transparency and reduce switching costs
6. Protect the environment, public health, public security or to
meet town and country planning objectives
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All of these targets gain increasing importance
Minimum quality levels for
network transmission services
Promote net neutrality
Transparency obligations
for transmission of applications
Reduce switching costs,
promote net neutrality
Infrastructure sharing &
co-investment Protect the environment, public health, public
security; meet town/country planning objectives
Sharing of in-building wiring,
(France, Spain, Portugal)
Avoid economically inefficient or physically
impracticable duplication of access
infrastructure to end-users
Price caps for retail &
wholesale intern’l roaming
Address market power independent of
dominance
MVNO access for wholesale
internat’l roaming Address market power independent of
dominance
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New approach to regulation of fixed and mobile
networks – At the cross-road
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Muchas Gracias por su atención!
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D. Ulrich Stumpf wik-Consult GmbH
Postfach 2000 53588 Bad Honnef
eMail [email protected] www. wik-consult.com