EU market recommendation: TC associations warn of competition restrictions

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German network operators are warning that the EU Commission's planned changes to the regulation of network access could have fatal consequences for the industry. The industry associations Anga, Breko and VATM sharply criticise the plan in a joint communication and in their statements as part of an EU consultation. They want to dissuade the Commission from this momentous regulatory change of course.

At issue are advance services, with which network operators gain access to the network of another company to be able to connect their own customers. A network operator who hopes to sell a DSL connection to a customer generally has to use Telekom's network for the so-called "last mile". In Germany, the Federal Network Agency has so far defined these types of access and sets prices and conditions in advance.

Moving away from "ex ante"?

This applies to the regulation of bitstream access, for example, but other types of access to network infrastructures are also subject to this so-called "ex ante" regulation. Industry representatives are now criticising the fact that, according to a Commission plan, these advance services will no longer be subject to predetermined conditions in future.

The bone of contention is the Commission's outline for new regulatory guidelines on relevant product and service markets in the electronic communications sector. This so-called market recommendation is regarded as the strategic centrepiece of EU telecommunications policy. It is of central importance for the regulation of the entire telecommunications sector in Europe.

With the amendment, the Commission wants to consider "important market and technological developments such as the expansion of 5G networks, the convergence between different types of networks and services and the expansion of fibre optic networks". It therefore proposes "gradually dismantling the sector-specific ex ante regulations and ultimately relying on competition law". A market correction could then only take place retrospectively – for example through costly legal action –.

"Fatal signal" for fibre optic expansion

The three associations see competition as an indispensable foundation for investment, innovation and attractive prices for consumers. However, this will not come about by itself, but must be ensured by clear regulatory framework conditions in the market recommendation. This would also provide the legal basis for national regulatory authorities such as the Federal Network Agency to take swift and effective action against market distortions.

The trio criticises the fact that the removal of regulated wholesale markets would massively restrict the ability of alternative providers to act and send a "fatal signal". In Germany in particular, such a step would have dire consequences: It would cement the market power of the incumbent operator and support Telekom's intentions to re-monopolise the fibre optic sector. It would also massively jeopardise the urgently needed private investments in the billions by member companies in network expansion. The Commission must therefore maintain the market recommendation "in its entirety".

In its statement available to heise online, the Breko underpins this demand with the specific market reality in Germany, where Telekom continues to control around 70 per cent of the infrastructure market. Regulation must therefore be continued on a large scale to counter two main dangers: It is necessary to prevent market power from being transferred from the old copper network to the new fibre optic market. In addition, Telekom is implementing market-distorting strategies, such as the targeted overbuilding of areas already developed with fibre optics and the foreclosure of the market through long-term, up to ten-year contracts with large customers.

Telekom, Orange & Co. favor deregulation

With this in mind, the Breko is also against price regulation for newly built fibre optic networks, as this would undermine the business models of investors. However, it considers the introduction of a new regulated market for wholesale access to mobile networks to be necessary. The lack of non-discriminatory network opening prevents competitors of the large network operators from offering competitive bundled products in the fixed network and mobile network. 5G.

Established players such as Telekom or Orange and large mobile operators such as Vodafone, on the other hand, tend to argue in favour of deregulating the markets, especially in the fibre optic sector. They believe that the existing framework slows down investment. They often advocate the abolition of access obligations or at least a significant reduction in price regulation to accelerate the amortisation of their fibre investments. Deregulation of access to wholesale products is also threatened by the planned Digital Networks Act (DNA) , which is also contested.

The markets currently regulated by the Federal Network Agency include access to the local loop and virtual access products based on both copper and fibre. In the past, the agency has already begun to lift regulation in certain areas, such as large cities with over 60,000 inhabitants, where it found effective competition. A controversial new element of its practice is "regulation light" for fibre optic networks. This involves dispensing with interventions such as a prior price specification for specific products and specific regulations against discrimination against Telekom.

(mki)