David Burnstein's List: Unbundling

The European Commission has adopted new priorities for its Digital Agenda, with the focus on expanding broadband services. Adopted in 2010, the Digital Agenda sets targets for the period to 2020 on using ICT to expand the EU economy and meet social goals. The EC has adopted seven priorities from the Digital Agenda that it will focus on in the period 2013-14, of which broadband is number one. EC vice president Neelie Kroes, responsible for digital economy issues, said her top priorities will be increasing broadband investment and maximising the digital sector's contribution to the EU economy.

The main focus in 2013 will be finalising the regulatory framework for wholesale broadband access, currently under consultation with EU telecoms regulator Berec. The EC said it plans ten actions in 2013 on broadband; these include recommendations on stronger non-discriminatory network access and the new costing methodology for wholesale access to broadband networks, net neutrality, universal service and mechanisms for reducing the civil engineering costs of broadband roll-out.

DT’s application for an increase in the ULL fee comes after European Commissioner Neelie Kroes last summer agreed to more investment-friendly regulation and announced stable prices in the long term for the last mile, which would also take into account factors such as the general increase in prices. ‘We are taking Neelie Kroes at her word and expect specific incentives for us to invest billions of euros,’ van Damme said.
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the FNA has steadily reduced the monthly local loop rental fee, while DT has consistently applied for higher charges in view of its cost statements. In April 2005 the ULL charge fell by nearly 10% to EUR10.64, before dropping to EUR10.50 in April 2007 and EUR10.20 two years after that. It was reduced to the current rate of EUR10.08 in April 2011, at which date the regulator also cut the fee for LLU access to the street cabinet from EUR7.21 to EUR7.17; DT has applied for this charge to increase to EUR8.80 per month from April 2013.

French regulator Arcep has launched a public consultation on possible changes to local loop unbundling (LLU) regulation during its upcoming round of market analysis (mid-2014 to mid-2017) of high speed and very-high speed internet markets. 86.3% of the French population is currently able to access alternative operators’ services via LLU, which was achieved via self-regulation, the encouraging of unbundling ever-smaller subscriber access nodes, and via the projects implemented by local authorities aimed at increasing broadband access for subscribers in their regions. The high rate of coverage in terms of number of subscriber lines (86.3%) has been achieved even though only 40% of incumbent France Telecom-Orange’s subscriber access nodes have been unbundled. It is unlikely that unbundling will be achieved throughout France before the completion of the next round of market analysis in mid-2017. However, where unbundling has not been implemented, the range of services available to subscribers is often limited and generally does not include television, for example. For this reason the regulator wishes to collect analyses from market players on possible modifications to its LLU regulation in order to provide a near-homogeneous level of service to the entire population, thereby reducing the digital divide. The public consultation will be open until 15 May 2013.

Germany's Federal Network Agency (BnA) has issued a draft decision allowing Deutsche Telekom to upgrade its copper network using vectoring (VDSL2) technology for faster internet services. The regulator said that Telekom must provides rivals with access to the new technology, but could refuse access in areas where alternative networks are available. The decision was immediately attacked by German broadband network operators association Breko, arguing that it will make it much more difficult for Telekom rivals to build broadband networks.

Under the new rules, BT would be obliged to maintain a sufficient margin between its wholesale and retail superfast broadband charges to allow rivals to profitably match its prices.

Rival operators currently retail superfast broadband over BT's network, using a process known as 'virtual unbundled local access' (VULA). Ofcom is proposing to put in place a regulatory condition requiring BT to ensure that the margin between its wholesale VULA charges and its retail superfast broadband prices is sufficient for rival operators to compete and make a profit.

In the late 1990s, Mr. Niel jumped at the opportunity when the French government ordered former state monopoly Orange SA to open its telephone network to competitors, and he founded Iliad. Mr. Niel and a team of 10 designers built their own set-top box, called the Freebox, pioneering the technology behind the "triple-play" offer of broadband Internet, telephone and TV over IP for a fixed price of around €30.

French telecoms watchdog, the Autorite de Regulation des Communications Electroniques et des Postes (Arcep), has adopted its Decision No. 2014-1102, following the fourth round of analysis of Market 1 (fixed telephony access) and Market 2 (call origination at a fixed location). The decision came into effect on 3 October 2014, and will remain so for a period of three years (until 2 October 2017). According to the final document, Arcep has prolonged the obligation imposed on incumbent fixed line operator Orange France to provide a wholesale line rental product (VGAST) at cost-based prices, while also introducing a gradual relaxation of the pricing obligations imposed on Orange for straight carrier selection offers. Further, Orange will switch from the current cost-based regime to one that forbids excessive pricing of these products, starting on 1 January 2017, in order to encourage alternative operators’ to provide unified plans that include access and voice call services. Orange France is required to publish an announcement on the planned price hike by 1 January 2015, and detail the support measures that will be put into place to facilitate the transition to a VGAST wholesale line rental solution for operators willing to switch to the platform.

Finnish telecoms regulator the Finnish Comms Regulatory Authority (FICORA) has announced that decisions issued by the country’s Supreme Administrative Court (korkein hallinto-oikeus, KHO) have confirmed its views on the need to regulate metallic and fibre-optic local loops. However, the KHO has repealed FICORA’s decision which imposed a maximum price for such connections.

The arrival of mobile virtual network operators (MVNOs) in Chile has led to a 76% drop in call rates charged by network operators, from CLP250 (USD0.43) per minute to around CLP60 per minute, Diario Financiero writes.

But Britain could have more if the incumbent was forced to open up its “ducts” — effectively the holes in the ground through which its cables link exchanges to homes. Instead of buying space on BT’s own copper cables, rivals could lay their own, thus creating end-to-end networks. While the existing regulations theoretically allow this, the procedures are costly and take too long.

The European Commission has made fostering investment in new fibre-optic networks to meet rising demand for data services a major plank of a reform of the current set of fifteen-year-old telecoms laws when they are reviewed in September.

This marks a shift from the main purpose of telecoms regulation which has focused on allowing new entrants to compete on a more level playing field with former state-owned monopolies.
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Goldman Sachs has estimated that rolling out fibre-to-the-home costs between 500 and 800 euros ($907.12) per household. On the other hand upgrading a copper network using vectoring technology - the most advanced form of which can deliver download speeds of up to 800 megabits per second - only costs around 300 euros per household.

The Canadian Radio-television and Telecommunications Commission (CRTC) has issued a follow-up decision requiring the country’s largest telecoms companies to provide wholesale access to their high speed fibre/cable fixed broadband access networks including fibre-to-the-premises (FTTP). The policy was mandated last year, but implementation was delayed whilst Bell Canada led unsuccessful appeals claiming that investment in fibre networks would be harmed by the new rules forcing the large network operators to offer a greater level of access to smaller ISPs – a point the CRTC disagreed with, claiming that ‘increased choice is expected to drive competition, resulting in further investment in telecommunications facilities’.

Charge controls set in Ofcom’s 2014 Fixed Access Market Reviews expired on 31 March 2017, and the watchdog is currently consulting on new controls as part of its WLA market review. In response to Openreach opting to reduce its price, meanwhile, Ofcom said it no longer believed it was ‘necessary or proportionate to exercise [its] direction making powers to specify the fair and reasonable charge’, adding: ‘Openreach’s commitment achieves the same outcome as we proposed in our consultation but brings certainty and clarity to stakeholders at an earlier stage without the need for regulatory intervention.’

It would be preferable to encourage the competition to invest in infrastructure (e.g. uniform procedures for excavation works, avoiding tax on the telecom infrastructure) rather than subjecting established telecom operators to more stringent regulation. Various recent scientific studies have demonstrated that this has a beneficial effect on quality.

Unbundling of vertically integrated utilities has become an integral element in the regulation of network industries and has been implemented in many jurisdictions. The idea of separating the network, as the natural monopoly, from downstream retailing, which may be exposed to competition, is still subject to contentious debate. This is because there is much empirical evidence that unbundling eliminates economies of vertical integration while empirical evidence on price reducing effects is still lacking. In this paper we study the effect of legal unbundling on grid charges in the German electricity distribution industry.

British telecoms regulator Ofcom has launched a consultation on its ‘initial views on regulatory measures for wholesale fixed telecoms markets from 2021’ which it believes will, in combination with duct and pole access, help boost investment by promoting network-based competition. Having set out a broad strategy to support investment and competition in full-fibre services in July 2018, the regulator says the latest consultation aims to secure investment in fibre infrastructure from both fixed line incumbent BT and other alternative operators. To that end, Ofcom seeks to ensure that altnets have ‘a fair opportunity to invest at low cost’, and in saying this was critical to its strategy, it suggested this would mean giving such companies ‘access to the same benefits BT has to re-use existing duct and pole infrastructure on equivalent terms’.

It has been suggested that Liberty Global is considering the strategic shift amid an increased investment in fibre from both BT and smaller, alternative operators, which is expected to lessen the technical advantage that Virgin Media’s cable network currently has against Openreach’s copper infrastructure. As a result of such network developments from rival providers, Liberty Global is reported to be examining whether it would be better off operating a wholesale business with lower margins but an increased market share.

One option which is understood to be under consideration is a wholesale deal with Sky only, excluding the likes of Vodafone UK, TalkTalk and other alternative ISPs; in return for an exclusive agreement, Liberty Global could look for reciprocal benefits in the supply of Sky Sports and other channels for Virgin Media’s pay-TV service.

The Order eliminates rules requiring unbundling of the following network elements, subject to certain conditions and multiyear transition periods:
· DS1 and DS3 Loops.
· DS0 Loops.
· Legacy Narrowband Voice-Grade Loops.
· Dark Fibre Transport.
The Order also discontinues, subject to a three-year transition period, a requirement that ILECs make available for resale their retail legacy telecoms services at cost-based rates. These services are predominantly used by CLECs to provide legacy voice services to business and government customers.