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Telecommunications: Broadband markets in Luxembourg will be further opened to competition

European Commission - IP/06/1504   03/11/2006

Other available languages: FR DE

IP/06/1504

Brussels, 3 November 2006

Telecommunications: Broadband markets in Luxembourg will be further opened to competition

In a letter sent on 30 October 2006 to the telecom regulator of Luxembourg, Institut Luxembourgeois de Régulation (“ILR”), the European Commission welcomes a regulatory measure proposed by ILR at the end of September that will give new market entrants high-speed access to end-customers (or bit-stream access) via the broadband networks of Luxembourg’s telecom incumbent EPT (Entreprise des Postes et Télécommunications). The Commission welcomes in particular that the remedy proposed requires bitstream access regardless of the technology used by EPT (ADSL2, ADSL2+ and VDSL). Furthermore, the Commission invites the regulator of Luxembourg to ensure that the remedy applied is effective in ensuring competition to the benefit of consumers.

Opening the broadband market in Luxembourg to more competition will lead to better services and lower internet access prices for consumers”’, commented Information Society and Media Commissioner Viviane Reding. "I however note that the effectiveness of the measures now to be adopted by the regulator in Luxembourg is crucial. While bitstream access will be made available to new market entrants in Internet protocol (IP)-mode now, it may be necessary for ILR, if retail prices remain high, to impose in the future further bitstream access at other levels than IP, taking into account the current demand from competitors for a more flexible wholesale input, which would allow for more differentiated retail products".

On 29 September 2006, the telecom regulator of Luxembourg, ILR, notified to the Commission, in applying EU telecom rules, measures that it intends to impose on EPT on the wholesale broadband market in Luxembourg. EPT is the only supplier in the relevant market thus having 100% market share in the relevant wholesale market. The remedies proposed by ILR will require Luxembourg’s telecom incumbent to open its broadband networks to competitors by allowing them to purchase a high speed access link to the customer premises from EPT with transmission capacity for broadband data in both direction, thus enabling new entrants to offer their own, value-added services to end users. Under the terms proposed by ILR, bitstream access will need to be granted by EPT also to a future VDSL (= very high speed digital subscriber line)-infrastructure.

In its letter under Article 7 of the EU Framework Directive for electronic communications, made public today, the Commission, which supports the measures taken by Luxembourg’s regulator, indicates that the access obligation on ETP should serve to ensure effective competition in the broadband market, so that users derive maximum benefit in terms of choice, price and quality and that efficient investment in infrastructure is encouraged.

If retail prices remain high[1] despite the wholesale measures imposed, ILR should consider imposing access also at other levels than IP.

The objective of access regulation under the EU regulatory framework is to allow new market entrants to offer their services initially via the infrastructures of the incumbent operator. The revenue generated thereby by new market entrants should allow them to progressively “climb the ladder of investment” and finally to invest into their own infrastructure. As soon as there are competing infrastructures, access regulation will be phased out, leaving the market under the control of competition law only.

In its letter to Luxembourg’s regulator, the Commission asks ILR furthermore to ensure standalone bitstream access (the provision of broadband access independent of the obligation to buy a telephone connection from EPT) in the near future to enhance competition on the broadband market in Luxembourg.

Background

What is bitstream access and why does it promote competition?

Bitstream access allows competitors to have access to the established operators' infrastructure in order to offer broadband services (for example high-speed internet, telephony) directly to end customers (households and business customers). This is of crucial importance for competition on the end user market. In a market dominated by a strong incumbent operator, it is often uneconomic for new market entrants to lay out double infrastructure up to the street cabinet – the crossroad quite near the homes that serves a limited number of households, in particular if broadband uptake is not high. (The access to the street cabinet is also called “local loop unbundling”).

With bitstream access, competitors have a higher control about the quality parameters of their services compared to mere reselling of the products of the established operator. Bitstream access allows competitors to distinguish their offer from the incumbent's, for example as regards bandwidth, uploading vs. downloading speed, variation in bandwidth etc.

IP (Internet Protocol) bitstream access is relevant for the connection to private end customers as it allows for example “triple play”, i.e. combined offerings of fixed telephony, internet access and television services.

ATM bitstream is important to compete in the segment for business customers as it allows competitors to offer particular high quality services to their end customers, such as videoconferencing or the connection of workplaces at home at a quality level which is offered in an office environment

The vast majority of EU member states mandated bitstream access already some time ago. Bitstream access thus is today a reality on the broadband markets of Austria, Belgium, Cyprus, Denmark, Finland, France, Greece, Hungary, Ireland, Italy, Lithuania, Portugal, Slovenia, Spain. Sweden and the UK, with bitstream access in preparation also in the Czech Republic and in Germany, while other countries (such as the Netherlands) are already profiting from strong infrastructure-based competition.

Why did this case end up in Brussels?

According to European law, national telecom regulators are required to notify their market analysis with regard to several pre-defined markets to the Commission. One of these markets is the market of bitstream access, also called "wholesale broadband access”.

If national telecom regulators find that a company has a position of significant market power, they have to impose remedies in order to ensure effective competition.

The Commission has the right to veto the definition of the markets and the finding of significant market power. On the notified remedies, the Commission can issue comments which have to be taken into utmost account by national regulators.

This approach assures harmonised regulation and is important to ensure the internal market in the European Union. Wildly different regulatory regimes would imply higher costs for enterprises that have activities in different EU Member States. The harmonised approach assures also a higher degree of legal certainty.

How good is Luxembourg today as regards broadband penetration?

Luxembourg is, with 17.6% above the EU average in terms of broadband penetration (=broadband subscriptions per population). It has achieved this result only in the course of 2006, after having been for years a clear underperformer in terms of broadband penetration. The relatively recent implementation of the EU regulatory framework by Luxembourg (following a judgement of the ECJ) have contributed to legal certainty for operators and paved the way for new market entrants to compete.

[ Figures and graphics available in PDF and WORD PROCESSED ]

Further information

The letter sent on 30 October by the Commission to the Luxemburg regulator is published at:

http://ec.europa.eu/information_society/policy/ecomm/article_7/commission_decisions/index_en.htm

On the Article 7-procedure between the European Commission and national telecom regulators, see MEMO/06/59.


[1] ILR notes that broadband retail offers in Luxembourg are usually limited in use (capped volumes of data allowed for downloading and uploading). The monthly tariffs of the 2 Mbps offers in Luxembourg range from 39.99€ up to 50€. Such amounts can be put in balance with equivalent retail offers in other Member States where the retail prices range typically from 15€ to 30€ (while sometimes including additional services such as TV and phone calls).


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