• European Commission Endorses Belgian Regulator's Proposal to Restore Regulation in Wholesale Broadband Markets
  • October 2, 2009 | Author: Karel Janssens
  • Law Firm: Crowell & Moring - Brussels Office
  • By letter of 21 August 2009, the European Commission has endorsed the proposal of the Belgian regulator IBPT to retroactively restore regulation in the markets for wholesale access to telecoms infrastructure and broadband services.

    Background
    The Belgian telecoms regulator, the "IBPT", intends to reintroduce regulation on wholesale access to telecoms infrastructure and broadband services. The IBPT already set out rules for these markets (more specifically the market for wholesale unbundled access (including shared access) to metallic loops and sub-loops and the market for wholesale broadband access in Belgium - markets 11 and 12) on 10 January 2008, but these were partially annulled by the Brussels Court of Appeal on 7 May 2009.

    The Brussels Court said that the IBPT had not presented sufficient arguments and facts to support its conclusions and the regulatory obligations it intends to impose. For instance, the Court annulled Belgacom's designation as an undertaking having a dominant position on the bitstream market. The Court found that the IBPT had failed to provide a sound and reliable analysis demonstrating Belgacom's ability to behave independently from its wholesale clients and retail competitors. Consequently the imposed remedies were annulled as well.

    Since the majority of IBPT's measures that ensure wholesale access were annulled with retroactive effect, the Court's judgment caused major legal and economic uncertainty for the alternative operators in the market. The IBPT has therefore produced a new decision that aims to remedy the lack of motivation in the market analysis and for the annulled remedies, and which will have a retroactive effect up to 10 January 2008.

    IBPT's proposal
    In its new proposal, the IBPT further substantiates its finding that Belgacom has significant market power and restores all regulatory obligations previously imposed.

    For instance, in order to counter the Court's decision that the IBPT had not sufficiently motivated the need for bitstream regulation , the IBPT referred to the concept of the ladder of investment. Given (i) the characteristics of demand in the retail market, (ii) the limited roll-out of LLU, (iii) Belgacom's move to an all-IP platform and (iv) the subsequent inability of alternative operators to recoup future LLU investments, the IBPT concludes that unbundled access and bitstream access can and must coexist in the Belgian market and that it is inappropriate to rely on unbundled access as the sole wholesale remedy to increase competition in the downstream retail markets.

    Furthermore, with regard to the Court's finding that IBPT´s decision failed to take into account the indirect pricing constraint that is exerted by cable on Belgacom in the bitstream market, the IBPT referred to updated market data which confirm that retail prices have remained stable over time and that the cost of the wholesale input remains a relatively limited part of the retail price. This would confirm IBPT's position that the indirect pricing constraint that is exerted by cable on Belgacom cannot call into question the SMP finding.

    With regard to some regulatory obligations which the Court considered to be unjustified, the IBPT focused on substantiating (i) geographic differentiation of the access remedy, (ii) prohibition to withdraw previously granted access without the prior consent of the IBPT and (iii) sub-loop unbundling.

    The Commission's comments
    The Commission largely restated its previous comments and endorsed the proposed plan of the IBPT.

    I. With regard to promotion of investment on infrastructure in relation to wholesale unbundled access (including shared access) to the local loop and competition at the retail level

    The Commission stated that the currently available market data do not point towards differentiated competitive conditions to an extent that would justify a delineation of sub-national markets. However, the Commission invited IBPT:

    • to examine in the national context the reasons for the high retail prices for broadband services in Belgium especially in relation to the significant margins existing between the wholesale inputs and the relevant retail products;
    • to ensure effective implementation of the remedies to further enhance the provision of local loop unbundling and, in particular, to ensure that the respective price levels of local loop unbundling and bitstream create the appropriate incentives for alternative operators to switch from the bitstream offer to the local loop unbundling offer;
    • to assess the impact of the regulation of LLU and Wholesale Broadband Access in its subsequent analysis, in particular by monitoring the development of the competitive conditions in the retail market, including checking whether the future market development may justify a more refined geographical market definition.

    II. With regard to access to fiber infrastructure

    The Commission did not object to IBPT's assertion that access to the NGN access network is not part of the market for wholesale unbundled access to the local loop. The Commission, whilst acknowledging that the remedies proposed by IBPT in the wholesale broadband access market guarantee access to high speed broadband technologies (including VDSL), nevertheless invited IBPT to reassess the market conditions in view of guaranteeing a level playing field in the future NGN environment.

    Next step
    The IBPT can now adopt the proposed measures and restore regulation in the wholesale broadband markets, but has to take utmost account of the Commission's comments.

    Links:

    • http://ec.europa.eu/information_society/policy/ecomm/doc/implementation_enforcement/article_7/summary_decisions/be_2009_0949_0950.pdf
    • http://circa.europa.eu/Public/irc/infso/ecctf/library?l=/commissionsdecisions/be-2009-0949-0950/_EN_1.0_&a=d