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April
2000
General
comments
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Oftel
supports the European Commission’s objective of promoting the
competitive provision of innovative services via the local-access
network. Local-loop unbundling, line sharing and bitstream access
can play an important part in achieving this.
- A Commission
recommendation could give valuable support to Member States in their
efforts to bring competition into this part of the market. However,
Oftel wishes to stress the need for a fully considered, proportionate
and pragmatic approach to this issue. If this recommendation is to
achieve widespread acceptance and contribute effectively to the Commission’s
aims, a degree of flexibility is needed.
- Oftel’s
particular concern is that the recommendation does not recognise that
markets in the different Member States are at different stages of
development of competition. Instead, the proposed recommendation seems
to assume that the competitive situation is the same throughout the
EU and that a single solution is appropriate. This is contrary to
the Commission’s own recognition—notably in its communication
Towards a new framework for electronic communications infrastructure
and associated services: the 1999 communications review (COM(1999)539)—that
"the differing state of development of the market in each Member
State means that similar issues will often arise at different times
in different Member States."
- Where Member
States’ circumstances may differ substantially, a "one size
fits all" solution will be neither appropriate nor proportionate.
The Commission should therefore confine itself to giving general guidance
on the implications of current EU law, making clear the overall objective,
recommending that the necessary rigorous analysis be carried out in
each Member State and, if this shows that action is needed, recommending
the action that should be taken.
- Local-loop unbundling
is a far from straightforward process. Member States may face practical
and legal difficulties. In these circumstances, a timetable that is
not achievable may create unnecessary recriminations, thus causing
delay in achieving the desired outcome.
- It is also important
that the legal basis for any recommendation be clear and allow Member
States to proceed with confidence. In this context, Oftel welcomes
the Commission’s commitment to setting out in detail, in an explanatory
memorandum accompanying the recommendation, the rationale behind the
application of the Voice Telephony Directive to line sharing and article
82 of the Treaty on European Union to full unbundling.
- Specific comments
on the text of the proposed recommendation can be found in the annex
to this response.
Rationale
for unbundling
- The current wording
of the proposed recommendation suggests (recitals 2 and 3) that the
same market conditions—lack of effective competition at the local-access
level—apply and will continue to apply across all Member States.
Oftel accepts that competition at the local level is currently largely
limited. However, for historic reasons, the extent of local competition
is not identical in each case and, depending on the deployment and
uptake of new access technologies, competition is likely to develop
at different rates in different areas. It is not, therefore, appropriate
to reach a conclusion based on a pan-EU assessment of market conditions.
The recommendation should explicitly associate the requirement
for unbundling with an absence of effective competition in the local-access
network. It should recommend that each national regulatory authority
(NRA) conduct a market assessment within its national jurisdiction
and act on that basis.
- Moreover, in
line with the principle of proportionality, NRAs should give consideration
to removing obligations for unbundling in local-access markets where
effective competition has become established.
- Similarly, while
it is appropriate for the Commission to review the recommendation
and assess its effectiveness (recital 14), this review should not
take the form of a pan-EU market assessment with generic obligations
following on that basis. Reviews of specific market conditions should
be conducted at regular intervals at the national level, with any
actions following from that assessment.
- The Commission
suggests (recital 6) that one form of access—full unbundling—is
not sufficient to meet market demand and that line sharing is needed
in addition. Oftel’s view is that the conclusion that both full
unbundling and line sharing are necessary may only be reached once
certain tests have been conducted: that there is market demand for
each of the services in question, that that demand is "reasonable"
and that action taken to meet that demand is proportionate (i.e. the
benefits of taking action outweigh the costs). Oftel suggests that
the Commission should recommend that NRAs conduct these assessments
and take action to mandate one or both forms of unbundling, together
with bitstream access, as appropriate.
Timetable
- While there needs
to be a degree of urgency in adopting these measures and targets are
a good way of driving action forward, it is crucial for the success
of the recommendation that targets be practical and achievable.
Local-loop unbundling is a process, not an event. Oftel is fortunate
in being some way through the implementation process—trial orders
have been placed, with colocation trials shortly to be under way.
For a Member State that has not begun the process, there is more work
to be done.
- Before a successful
launch (by which Oftel means widespread availability of services delivered
via unbundled loops):
- Member States
will need to conduct a consultation, consider responses and implement
relevant legal mechanisms (which may include primary legislation);
- industry will
need to resolve technical and operational issues (taking any relevant
experience from elsewhere);
- the notified
operator will need to develop computer systems to handle orders; and
- trials need to
be conducted (which may themselves last a number of months).
- Some of these
activities may be carried out in parallel. Nonetheless, it may be
difficult for all to be complete for a full launch by end-2000. Oftel
suggests that an achievable and practical target in line with the
conclusions of the Lisbon European Council would be for Member States
to "take significant steps toward" unbundling the local
loop by end-2000, e.g. to conduct a consultation and put in place—or
take action to put in place—any necessary legal mechanisms. Full
availability of unbundling should follow as soon as is practicable
thereafter.
- Line sharing
raises similar issues to full local-loop unbundling and some additional
operational issues. It may or may not be possible to introduce line-sharing
in "parallel" with (i.e. at the same time as) full local-loop
unbundling (recital 6). Again, practicability should be the test.
- The Commission
should make clear that, under nondiscrimination rules, wholesale bitstream
access should be made available at the same time as to the incumbent’s
retail operation.
ANNEX:
SPECIFIC COMMENTS ON THE TEXT OF THE PROPOSED RECOMMENDATION
Introduction
The
introduction states that market entrants support the position that all
three types of access should be made available. However, the Commission
should bear in mind that entrants will always press for the maximum
number of available products. The appropriate test should be whether
the NRA considers that all the products requested are reasonably
required.
Recitals
Recital 2. This suggests that entrants will never be able
to match the economies of scope and scale of notified operators. This
may be the case with the traditional copper network, but new local-access
technologies could potentially enable others to compete with incumbents
in local-access delivery. Oftel suggests: ". . . new entrants do
not have wide-spread alternative network infrastructures and are unable
with traditional technologies to match the economies of scale
and scope of operators . . ."
Recital 3. This states that other technologies do not offer
the same functionality or ubiquity as the incumbent’s network.
It is true that other networks such as cable networks are not currently
ubiquitous and are unlikely to become ubiquitous within the foreseeable
future; that is a major factor in the rationale for mandating local-loop
unbundling. However, it is premature to suggest that they will not offer
(as far as consumers are concerned) the same functionality. For instance,
cable is seen in the United States in certain circumstances to be a
substitute for DSL. The true level of "convergence" between
these technologies is something that will only be known once the market
is more developed.
Main
provisions
Article 3(2). The Commission has quite rightly highlighted
the potential for a margin squeeze in the pricing arrangements for local-loop
unbundling. However, "unbalanced tariffs" will not in themselves
necessarily trigger a margin squeeze, as the Commission suggests. Inconsistency
is the real issue. NRAs should ensure that pricing policy for local
loops is consistent with pricing policy for retail telephony services,
whether tariffs are unbalanced or not.
Article 3(5). Oftel considers that removing price regulation
once markets are competitive, as suggested, would have the same effect
as removing the entire obligation. If the incumbent does not of its
own volition wish to continue to supply unbundled loops, it will ensure
that the price is unattractive. Oftel suggests instead that NRAs conduct
periodic major reviews of market conditions and adjust pricing principles
and supply obligations as necessary. Reviews of specific prices
should occur more often—perhaps yearly—to ensure that prices
accurately reflect underlying costs and the incumbent is not under-
or over-recovering.
Article 4(1). This states that "physical access should
be provided . . . at any feasible point where the new entrant can collocate
. . ." If sub-loop unbundling, where feasible and necessary to
ensure continued development of competition, is to be included within
the recommendation (it is mentioned in the annex), it should be referred
to at this point.
Oftel
suggests that the recommendation not state any specific equipment that
should be permitted for interconnection with or access to the local
loop. Not all the equipment listed (e.g. switches) is "necessary,"
but if, on the other hand, any equipment is specifically excluded, debate
is likely to arise over the definitions of specific pieces of equipment
and what should and should not be permitted in colocation rooms. Oftel
would suggest the generic term "equipment necessary for an operator
to deliver services via an unbundled loop."
Article 4(2). Oftel welcomes the Commission’s recognition
of the need for establishing objective principles behind any restrictions
imposed to "maintain network integrity." However, article
13(2)(b) would appear only to apply to the maintenance of integrity
of analogue voice services and not the integrity of services carried
over the higher-frequency portion of the line. Oftel would welcome clarification
of whether article 13(2)(b) can be imputed to apply to integrity of
higher frequencies of the line or whether any other relevant provisions
might be applicable.
Article 5(4). As many of the activities relating to the implementation
of local-loop unbundling are detailed and practical, Oftel suggests
that the suitable forum for sharing experiences is likely to be the
Independent Regulators’ Group (IRG). IRG could take on the role
of presenting a consolidated view to the ONP Committee at regular intervals.
Annex
Point 1 (3rd bullet). Oftel suggests: "access to space
within an MDF site of the notified operator . . ." It is unlikely
for security and network-integrity reasons that access would normally
be permitted to the MDF.
Point 12. Oftel suggests: "Information available
to operators via the OSS should include all loop qualification (and
other information) available to the notified operator."
Point 14. Oftel suggests: "Prices (or pricing principles
where services may be bespoke) for each feature, function and facility
listed above . . ."
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