NGA Networks (Download for slideshow)

COMPETITION & REGULATORY GROUP

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Next Generation Access Networks

Andrew SharpeCompetition Law & Regulation in the Telecoms,

Internet & Broadcasting Sectors 2010


• 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

© Draka Holding N.V. (permission being sought)


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”

• 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:


• Definitions:


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.

• Wired network access:

– twisted pairs(100 pair externalillustrated)

– co-axial cable(32 core externalillustrated)

– fibre optic (48 fibre,8 ribbon slottedexternal illustrated)

NGA Guidelines

NGA Guidelines

• FTTx

Fibre to the:

Node (Cabinet) Curb (Cabinet) Building (Basement)HomePremises

= FTTH or FTTB

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

NGA Guidelines


NGA Guidelines


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

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

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

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

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

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

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”

NGA Guidelines

• Rungs of the ladder of investment

• 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

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

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?

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?

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”?

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

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/

telecommunications/broadband_decisions.pdf

– Mostly Article 4(3) under Council Regulation 659/1999 for rural development (Art. 107(3)(a))


“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.”


• NGAs in the UK?


• NGAs in Lyydington, Rutland, UK

Andrew SharpeCharles Russell LLPTel: + 44 (0) 20 7203 5194

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TMT_Lawyer

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Technology

NGA Networks (Download for slideshow)