Presentation on European Commission Recommendation on regulation of next generation access networks - 26 October 2010

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Next Generation Access
Networks
Andrew Sharpe
Competition Law & Regulation in the Telecoms,
Internet & Broadcasting Sectors 2010

2. Next Generation Access Networks
• Key elements from the NGA guidelines
• Multiple or mono-fibre?
• Is the Commission’s policy technology
neutral?
• Implementation of equivalence
• Practical legal challenges in moving
towards the next generation of fixed and
mobile networks
• State aid

3. © Draka Holding N.V. (permission being sought)
Next Generation Access Networks

4. NGA Guidelines
• Commission Recommendation
2010/572/EU
– Commission Recommendation of 20
September 2010 on regulated access to
Next Generation Access Networks (NGA)
– OJ L 251/35 dated 25.9.2010
– only 14 pages = “simples”
• Commission Staff Working Document
C(2010) 6223
– accompanies Recommendation
2010/572/EU
– 60 pages = “that’s more like it”

5. • Definitions:
“Next generation access (NGA) networks”
(NGAs) means wired access networks which
consist wholly or in part of optical elements and
which are capable of delivering broadband
access services with enhanced characteristics
(such as higher throughput) as compared to
those provided over already existing copper
networks. In most cases NGAs are the result
of an upgrade of an already existing copper or
co-axial access network”
NGA Guidelines
• Definitions:
“Next generation access (NGA) networks”
(NGAs) means wired access networks which
consist wholly or in part of optical elements
and which are capable of delivering broadband
access services with enhanced characteristics
(such as higher throughput) as compared to
those provided over already existing copper
networks. In most cases NGAs are the result
of an upgrade of an already existing copper or
co-axial access network”
• Definitions:
“Next generation access (NGA) networks”
(NGAs) means wired access networks which
consist wholly or in part of optical elements and
which are capable of delivering broadband
access services with enhanced characteristics
(such as higher throughput) as compared to
those provided over already existing copper
networks. In most cases NGAs are the result
of an upgrade of an already existing copper or
co-axial access network”

6. NGA Guidelines
• Definitions
“Metropolitan Point of Presence”
(MPoP) means the point of
interconnection between the access and
core networks of the NGA operator. It is
the equivalent to the Main Distribution
Frame (MDF) in the case of the copper
access network.

7. • Wired network access:
– twisted pairs
(100 pair external
illustrated)
– co-axial cable
(32 core external
illustrated)
– fibre optic (48 fibre,
8 ribbon slotted
external illustrated)
NGA Guidelines

8. NGA Guidelines
• FTTx
Fibre to the:
Node (Cabinet)
Curb (Cabinet)
Building (Basement)
Home
Premises
= FTTH or FTTB
Illustration © Riick under GFDL
(http://en.wikipedia.org/wiki/)

9. NGA Guidelines
Illustration © Riick under GFDL (http://en.wikipedia.org/wiki/)

10. NGA Guidelines
Illustration © Riick under GFDL (http://en.wikipedia.org/wiki/)

11. NGA Guidelines
• Access to wholesale physical network
infrastructure (Market 4)
– Access to civil engineering infrastructure
– Access to FTTH terminating segment
– Unbundled access to FTTH fibre loop
– Access where FTTN

12. NGA Guidelines
• Access to civil engineering infrastructure
– If duct capacity, NRAs to mandate access
– Access at cost-orientated prices
– Reference offer in place 6 mths from
request
– Encourage or, where national law permits,
oblige SMP operator to install “sufficient
capacity for other operators”
– Establish database of available civil
engineering facilities

13. NGA Guidelines
• Access to FTTH terminating segment
– In addition to civil engineering access where
SMP operator deploys FTTH
– Includes wiring inside buildings
– NRAs to determine distribution point, taking
into account that DP “will need to host
sufficient number of end-user connections
to be commercially viable for the access
seeker”
– Cost-orientated pricing
– Encourage (or oblige) deployment of
multiple fibres in terminating segment

14. NGA Guidelines
• Unbundled access to FTTH fibre loop
– Unless in particular geographical areas
where effective competition at downstream
level, mandate unbundled access (with
appropriate co-location and backhaul
measures)
– Access point normally MPoP
– Amend existing LLU reference offers within
6 mths after NRA mandate
– Cost-orientated pricing, including risk
premium in cost of capital for “additional and
quantifiable investment risk”
– NRAs to carry out margin-squeeze testing

15. NGA Guidelines
• Access where FTTN
– Obligation of unbundled access to copper
sub-loop, with supplemental backhaul
measures, including fibre and Ethernet
backhaul
– Reference offer in place in 6 mths
– Cost-orientated pricing

16. NGA Guidelines
• Wholesale broadband access
(Market 5)
– Access remedies maintained or amended
– Wholesale broadband access over vDSL a
chain substitute to access over copper-only
loops
– Access products available 6 mths before
SMP operator or retail subsidiary markets
NGA retail services

17. NGA Guidelines
• Don’t ignore the Commission Staff
Working Document:
– “the report… contains an analysis of the
content of the Recommendation, setting out
in more detail the range of remedies
available to national regulatory authorities
and the way they could be applied in an
NGA setting”

18. NGA Guidelines
• Rungs of the ladder of investment

19. • Commission’s Possible Policy
Responses:
OPTION 1: Regulatory forbearance and a
priori exclusion of remedies
OPTION 2: Imposition of full range of
access and pricing remedies
OPTION 3: Imposition of access
obligations adjusted for investment risk
NGA Guidelines
• OPTION 1: Regulatory forbearance and
a priori exclusion of remedies
– Only policy objective: investment in
networks
– Regulatory holidays (to you and me), but
definition of markets difficult
– Abandons cost-orientation?
– [Unstated, but Case C-424/07 European
Commission v. Federal Republic of
Germany]
• OPTION 2: Imposition of full range of
access and pricing remedies
– Essentially, current regime
– Argues “all rungs of the ladder of investment
would have to be present in every
conceivable regulatory situation, from duct
access over unbundling to bitstream”
– Access remedies would be requested to be
priced at very low levels (strict cost-
orientation, no/little consideration of
uncertainty or investment risk)
– Hostile to risk-sharing mechanisms

20. NGA Guidelines
• OPTION 3: Imposition of access
obligations adjusted for investment risk
– Access obligations appropriately adjusted
for investment risk, aimed at driving both
competition and investment
– Any change?
• See Article 8 Framework Directive 2002/21/EC
• Any help/change after amendment by Better
Regulation Directive 2009/140/EC

21. Multiple or mono-fibre?
• Encourage (or where national law
permits, oblige) deployment of multiple
fibres
• Not clear upon what basis additional
capacity to be valued/priced?
• Rationale?
– Technological neutrality?
– DWDM/optical switching?

22. Is the Commission’s policy technology
neutral?
• Policy, as set out in Staff Working
Document, is for technological neutrality
• In practice?
– Why define any broadband market by
reference to transport medium (twisted pair,
co-axial cable, optical fibre, radio)?
– Remedies based upon most practicable and
efficient network access points
• Location and nature of access points always
technology specific?
• Ethernet?

23. Implementation of equivalence
• Set out in Annex II of the
Recommendation:
– Principle of Equivalence
– Information on Infrastructure and DPs
– Ordering and provisioning
– SLAs/Reference Offer
– Functional separation “lite”?

24. Practical Legal Challenges
• Nothing new?
• Major challenges:
– NGA/NGN pricing?
– SLAs across whole network
– NGA impact on net neutrality?
– Cost-orientation for civil engineering assets

25. State aid
• Article 107(1) TFEU, cannot have state
funded NGA networks
• Application of Article 107(3) where aid
may be compatible with internal market
• Commission Guidelines for application
of State aid rules to broadband
networks (OJ C 235/7 30.9.2009)
• DG Comp list
– http://ec.europa.eu/competition/sectors/telecommunication
s/broadband_decisions.pdf
– Mostly Article 4(3) under Council Regulation 659/1999 for
rural development (Art. 107(3)(a))

26. Next Generation Access Networks
“The point is ladies and gentlemen that
greed, for lack of a better word, is
good.”
Gordon Gekko, “Wall Street”
“The point is ladies and gentlemen that
competition, for lack of a better word, is
good.”
“The point is ladies and gentlemen that
regulation, for lack of a better word, is
good.”

27. Next Generation Access Networks
• NGAs in the UK?

28. Next Generation Access Networks
• NGAs in Lyydington, Rutland, UK

29. Andrew Sharpe
Charles Russell LLP
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Email: andrew.sharpe@charlesrussell.co.uk
andrewjsharpe
TMT_Lawyer
http://www.linkedin.com/in/andrewsharpe
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