Berec calls for tools to fight 'non-monopolies'

Thursday 18 May 2017 | 16:53 CET | Background

Berec has analysed the European Commission's proposals for the telecom sector. In September 2016, the Commission unveiled its plans for a new Electronic Communications Code, the successor to the current regulatory framework and various directives and recommendations governing the industry. 

The national regulators, united in Berec, have now given their response, in a series of technical papers over a variety of subjects. Berec made a number of suggestions for improvement, and found that some proposals could have negative consequences or even make effective oversight impossible. One of the themes addressed is how to deal with markets where there is no longer one dominant former PTT. In some countries, there are two operators, and in some 200. 

New approach for oligopolies

An oligopoly is per definition not problematic, according to an analysis published by Berec already in 2015. However, there are two situations where a non-competitive oligopoly may prove damaging. 

The first is a market in which (two or more) providers secretly coordinate their behaviour and are able to penalise each other for breaking the status quo. This type of tacit coordination results in a static situation with limited competition and ultimately harms the interests of end-users.

There are also situations in which the providers are not secretly following each other, but in which two providers make choices aimed exclusively at each other. This chain of unilateral effects has a negative impact over the long-term for competitors in terms of tariffs, quality innovation and freedom of choice. 

The regulators do not see the proposed ECC addressing these risks, leaving them without any way to intervene. Berec's solution is to stick to the concept of significant market power, but add a new element: unilateral market power. This can be either part of SMP or in addition to it.

Regulators would have the power to determine UMP through market analyses and take measures to correct the situation. This would require changes in several points in the Code, but the UMP analysis would be conducted in the same way as SMP. The only issue is of course no experience yet with this. 

The issues of oligopolies is already relevant for a number of national regulators, notably the Netherlands and Belgium. While Berec does not name any specific countries, it notes that in a growing number of countries a second strong fixed player is emerging. 

200 providers: symmetry

Other regulators face a different question: imposing symmetric access obligations. Berec notes this is relevant in countries where there are local or regional players investing in access networks. For example in Sweden, where wholesale fibre services are spread across some 200 municipal networks and small providers. 

A SMP decision for the incumbent is in such cases not enough to keep all these mini fiefdoms in line. It's important in the development of new services that NGA networks are open from the start to third-party access, and not later, only when negative effects become apparent.

Regulators try to address this situation by imposing symmetric regulation. The measures are not the result of market analyses but other goals, such as protecting end-user interests like universal access and interoperability of services. 

Berec found that a number of definitions in the Code may limit these regulatory options and made suggestions to change this. The regulators still want to be able impose measures: from a broad definition, but checked by the Commission's ability to start an objections procedure.

The measures can be considered in line with issues such as the interconnection and interoperability of communication services. This may also mean that OTT service providers must adhere, for example for 112 availability, or that content providers, like premium TV channels, must make a fair offer for reselling their services. 

Furthermore, if a network operator must offer access to alternative providers, then it should not be the operator that determines at what point access is provided. However, the Commission's proposal and initial talks with the European Parliament resulted in hard definitions, such as 'network element' that could make the regulator's work impossible, Berec warned. 

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