How do the new EECC provisions for symmetric access obligations work in practice?

symmetric access obligations

In 2018, the European Electronic Communications Code (EECC) replaced the old European Regulatory Framework for Telecommunications.

In many ways, the new Code is similar to the previous legislative framework. Its overall objective remains the promotion of competitive market outcomes. A major change includes the promotion of gigabit networks as a specific objective of regulation. The EECC thereby recognises the importance of gearing market outcomes towards investments in gigabit networks. These gigabit networks are necessary to unlock the innovation potential of the ever-expanding digital economy. But the EECC also introduces some new regulatory tools such as an extension of the scope of symmetric access obligations.

New provisions for symmetric access obligations

The EECC contains two legal provisions to facilitate competitive market outcomes. These are regulation of SMP (or Significant Market Power) and symmetric access regulation.  The provisions for SMP regulation have remained largely unchanged compared to the previous Regulatory Framework. However, the EECC introduces an extension of the scope of the provisions for symmetric access obligations. A major difference between SMP and symmetric regulation is that the latter applies to potentially all operators, whereas SMP regulation only applies to operators with a dominant position.

SMP regulation

SMP regulation supports parties without their own network when an SMP operator refuses to grant access to its network. In that case, the regulators may impose a temporary access obligation. These access obligations may last until the alternative operator has acquired a market position of sufficient scale to build its own network. In other words, access seekers should “climb the investment ladder”. The final step of this ladder is to roll out own access networks to homes and buildings. As soon as parties can invest in their own access network, or when they can buy commercial access, regulators should withdraw SMP regulation. If they don’t, regulation distorts make-or-buy decisions and reduces incentives to invest in (gigabit) networks.

Symmetric access obligations

Symmetric access obligations apply to any operator irrespectively of its market power. They apply to network elements that cannot be duplicated. The presence of such network elements prevents alternative operators from further climbing the ladder of investment. Symmetric regulation is thus complementary to SMP regulation because it deals with barriers to FttH roll-out of that are not related to dominance.

The previous Regulatory Framework limited the scope of symmetric regulation to in-house wiring and civil engineering infrastructure (such as ducts and poles). These are network elements that are inefficient to duplicate. In other words, we do not want to them to be replicated from a social welfare perspective, because an access obligation avoids unnecessary duplication of investments while realising exactly the same welfare gains.  The EECC (Article 61(3) §1) restates these provisions.

The EECC (Article 61(3) §2) extends the scope of symmetric access regulation to a second category of non-SMP related barriers to replication. These are referred to as “high and non-transitory barriers to replication”. This second category involves network elements that we would like to replicate (because of dynamic welfare gains that cannot be realised with an access obligation) but there is no viable business case for replication. Think, for example, of FttH networks in sparsely populated rural areas. Note that these network elements used to be subject to SMP regulation only. Under the new EECC, they are now subject to two regulatory regimes. As a result, there is a risk that regulators can choose between regulatory regimes, depending on what suits best.

Unclarity about Article 61(3) §2

The extension of the scope of symmetric access regulation was not among the European Commission’s initial ideas for reforming the regulatory framework. Consequently, the impact assessment accompanying the EECC-proposal did not discuss this policy measure. Article 61(3) §2 has thus been included for unclear reasons and with little analysis of its impact.

The first draft of the EECC limited the extension of symmetric access obligations to “limited circumstances”. It was specifically designed “to facilitate the rollout of alternative networks in the most difficult and less densely populated areas”. The Commission included these reservations as it was aware of the potential negative effects on incentives to invest in new networks.

But even under these limited circumstances, the added value of Article 61 (3) §2 is questionable. Consider, for example, a situation where the business case for duplicating access networks is negative due to low population density. In such a situation, there is likely to be SMP and SMP regulation is sufficient to impose access obligations. Article 61 (3) §2 is therefore not necessary in such situations.

Alternatively, in the absence of SMP, infrastructure competition encourages network operators to continuously invest in network upgrades. Moreover, it likely leads to voluntary wholesale access. In the recent joint dominant decision in the Netherlands, the Court explicitly recognized last point. Article 61 (3) §2 would therefore be inappropriate in such cases, because the market is already competitive and access seekers can already use wholesale access.

Risk of regulatory failure

During the trilogue negotiations, the explicit reference to ‘limited circumstances’ and ‘most difficult and less densely populated areas’ was removed from the final text of the EECC. This created room for a broader interpretation of Article 61(3) §2, which potentially feeds a general reluctance among regulators to deregulate.

The regulatory framework (and thus the regulator) aims to eventually make itself redundant by guiding the market from a monopoly (as in the 1990s) to a market that is competitive and dynamic. This is also called the “sunset clause“. The EECC (recital 29) formalises this clause as follows: “This Directive aims to progressively reduce ex ante sector-specific rules as competition in the markets develops and, ultimately, to ensure that electronic communications are governed only by competition law.”

A failure to activate the sunset clause involves a risk of invoking a self-fulfilling prophecy in which all dynamics disappear, and regulation continues indefinitely. A seamless transition from SMP regulation to symmetric access obligations is thus a clear violation of the EECC’s objective.


Impact

Our report offers a robust (normative) economic framework to guide a somewhat politicized discussion on the interpretation of provisions for symmetrical access obligations in the new European Code for Electronic Communications. Liberty Global has shared and discussed the report with the policy makers and regulators in across Europe.

Client

Liberty Global

Output

An accessible report in understandable wording with a robust economic framework that explains how the new rules should be implemented.

Impact

Our report offers a robust (normative) economic framework to guide a somewhat politicized discussion on the interpretation of provisions for symmetrical access obligations in the new European Code for Electronic Communications.

Liberty Global has shared and discussed the report with the policy makers and regulators in across Europe.

Documents
  • The report is not public
  • The EECC can be found here
  • Draft Berec guidelines can be found here
Team
  • Nicolai van Gorp
  • Paul de Bijl
  • Harm Aben
  • Olga Batura