ComReg’s NGA regulations aim for a balance between competition and investment

OVUM VIEW

Summary

On January 31, 2013 the Irish telecoms regulator ComReg published its final decision on remedies for next-generation access (NGA) networks. The ruling designated incumbent operator Eircom as having significant market power (SMP) in the two markets for wholesale fixed broadband, and imposed regulatory obligations to address the identified competition concerns. The regulator hopes that this will lead to new operators renting Eircom’s fiber, and encourage even fiercer competition at the already-competitive retail level.

Eircom has welcomed ComReg’s decision. The operator says that the ruling will provide regulatory certainty, and allow it to proceed with the rollout of its fiber network. However, the rollout will need to continue at speed if the government’s ambitious targets are to be met.

The regulator’s decision largely follows the EC’s recommendation on NGA – the remedies imposed in some EU member states have differed from the recommendation to a far greater degree. The varied regulation of Europe’s wholesale broadband markets serves as a reminder that a one-size-fits-all approach does not, and should not, always apply. Although ComReg has not imposed full unbundling, its NGA remedies should promote competition and encourage investment, and ultimately aid the development of the market for high-speed broadband.

Fiber access obligations could create a more competitive market for superfast broadband

ComReg’s decision sets out new regulations for the wholesale fixed broadband markets. According to the regulator, it creates a framework “based on fair competition, transparency, and certainty” that will encourage increased investment by operators in next-generation broadband. It is likely that the ruling will lead to a more competitive environment for high-speed broadband, as alternative operators make use of the wholesale products. The regulator has designated the incumbent (and former monopoly provider) Eircom as having SMP in the markets for wholesale broadband access (WBA) and wholesale physical network infrastructure access (WPNIA), and has imposed obligations of access, transparency, non-discrimination, price control and cost accounting, and accounting separation.

Eircom’s two current main rivals in the retail broadband market are cable operator UPC and Vodafone (which rents wholesale services based on ADSL and ADSL2+ from BT Ireland). However, competition in fiber broadband remains limited, and ComReg has identified several concerns in the WBA and WPNIA markets. Promisingly, its remedies could encourage the entry of new high-speed broadband providers at the retail level, enabling a market-led transition to fiber. ComReg has not gone so far to require full fiber unbundling, but the new bitstream, VULA, and sub-loop unbundling (SLU) obligations should further increase competition in the fiber market at a pivotal stage of its development.

Ireland will find meeting its national broadband plan targets a challenge

Eircom has welcomed ComReg’s ruling, stating that it will ensure regulatory certainty for its fiber investment. The operator has set out a five-stage plan, dedicating €400m ($539m) to delivering a high-speed connection to up to a million customers by December 2014 via a combination of fiber-to-the-premises (FTTP) and hybrid fiber/copper fiber-to-the-cabinet (FTTC) technologies. Nevertheless, this rollout will need to continue at pace and on schedule if national broadband targets are to be met. The Irish government’s national broadband plan sets out some ambitious goals: to provide 70Mbps to 50% of the population by 2015, 40Mbps to a further 20%, and at least 30Mbps to the remaining 30%.

Eircom has already passed 100,000 homes and businesses with fiber, offering a headline speed of 40Mbps. The second phase of its rollout, which was announced in April 2012, will pass 250,000 premises by the time it is completed. Eircom’s strategy is positive, but Ireland faces a challenge in meeting its targets.

Many countries, including Ireland, have yet to meet their current-generation goals. According to the EC’s Digital Agenda Scorecard, over 10% of Ireland’s fixed broadband lines are still only capable of 2Mbps or less. If the country is to achieve its targets it will require the promised €350m ($472m) of state funds to be provided soon. It is also relying on UPC completing the rollout of its cable network, which already offers 35% of the population access to 100Mbps speeds.

ComReg’s ruling reflects EC policy, but some member states are not so compliant

ComReg’s decisions largely follow the EC’s 2010 recommendation on NGA. However, as Ovum’s recent report Regulating NGA: Remedies in Wholesale Broadband Access explains, NRAs in the EU have not been very consistent in adopting the EC’s recommendation. Some have adhered relatively closely to its provisions, whereas others have almost entirely failed to comply. Ovum expects member states to be conforming more fully by the time the next round of market reviews is completed, as the deployment of infrastructure will have progressed and fiber markets will have continued to develop. Still, it is not necessarily a bad thing that some regulators have avoided adhering too strictly to the NGA recommendation for the time being.

European fiber markets are still relatively small, and NRAs need to thoroughly analyze their own markets, taking into account the national context more than in other areas of regulation. In Ireland, ComReg decided not to impose fiber unbundling because alternative operators continue to make use of the unbundled local loop, and have made significant investments in fixed infrastructure. It is important that regulators avoid imposing disproportionate measures that could harm investment and infrastructure development in the longer term. Instead, they should adopt a flexible approach, recognizing that copper access is not yet a thing of the past, and that it can still play an important role in delivering superfast broadband.

APPENDIX

Author

James Robinson, Associate Analyst, Regulation and Policy

james.robinson@ovum.com

Further reading

Regulating NGA: Remedies in Wholesale Broadband Access (January 2013)

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