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IP/08/1704

Brussels, 14th November 2008

Telecommunications: Commission raises serious doubts about proposed Spanish broadband regulation

The European Commission has informed the Spanish telecoms regulator, Comisión del Mercado de las Telecomunicaciones (CMT), that it has serious doubts that the draft measures on the Spanish wholesale broadband access market, notified under the Electronic Communications Framework Directive, are compatible with EU law. It is unprecedented that a national regulator proposes to regulate wholesale broadband access only up to a certain speed (30 Mb/s in this case). The CMT further proposes to impose less stringent regulation in areas where alternative infrastructure operators seem to be active. In the context of the transition towards high speed broadband in Spain, the Commission needs to ensure that the proposed measures do not hinder broadband competition and are supported by empirical evidence. The Commission now has two months (until 13 January 2009) to take a final decision on whether or not the regulator can adopt the proposed measures.

Competition Commissioner Neelie Kroes said: "CMT's proposal comes at a time where fibre infrastructure is being rolled out by Telefónica. If this measure is put in place, alternative operators may be unable to compete effectively with Telefónica. The Spanish consumer is likely to suffer if the broadband market is not competitive."

Viviane Reding, the EU Telecoms Commissioner, said: "Unless CMT amends its proposal, consumers in Spain will in the longer term suffer from higher prices and less choice due to inefficient investment incentives. Regulatory holidays starting from 30 Mb per second are not acceptable for the Commission. Investments incentives must be right, but for both the incumbent and alternative operators."

On 13 October 2008 CMT notified the Commission of its proposal to give access to the civil works infrastructure of the incumbent, including its ducts, and to give wholesale broadband access (bitstream) to the local loop of the incumbent, be it based on legacy copper or new fibre rollouts, only up to the speed of 30 Mb/s. At the same time alternative operators should be able to compete on the basis of a wholesale broadband input while they are progressively rolling out their own Next Generation Access infrastructure ("NGA"). The CMT further proposes to lighten regulation in those areas where alternative operators have rolled out their own infrastructure (cable or local loop unbundling) and broadband competition has developed. This mainly concerns densely populated regions in Spain.

By letter of 13 November, the Commission informed the CMT about its concerns regarding the definition of the relevant wholesale broadband access market. In particular, the Commission considers that CMT has not presented sufficient evidence to support its finding that speeds above 30 Mb/s could be excluded from the market definition. Also, the Commission considers that the evidence provided so far by the CMT is not sufficient to justify the inclusion of alternative infrastructures (cable and local loop unbundling) in the market definition. The Commission is also seeking further information from CMT on the geographic scope of the market.

The Commission is particularly concerned that a potential under-regulation of Telefónica's wholesale broadband access services may impede alternative operators from competing effectively with Telefónica in the key market of broadband services. This is especially critical in the current stage of NGA deployment in Spain where Telefónica has initiated a large scale fibre deployment. It is likely that alternative operators will take longer to deploy their own fibre infrastructure and in the meantime a high speed wholesale broadband input may be needed to ensure effective competition at the retail level, especially in the context of the development of multiple play offers in Spain.

During the next two months, the Commission will call for and assess further market clarifications and data from CMT and the market players.

Background

In accordance with the EU's Telecoms Rules, where an NRA (national regulatory authority) determines that a relevant market is not effectively competitive, it shall identify operators with significant market power and impose appropriate regulatory obligations (MEMO/07/457). In particular, the two wholesale broadband markets ("market 4" and "market 5") warrant ex-ante regulation, under the Commission Recommendation on relevant markets (IP/07/1678).

National regulators are required to notify their regulatory proposals to the Commission and other NRAs under the so-called Article 7 procedure. They may make comments on notified draft measures to the NRA concerned. The Commission may also, following in-depth investigation, require a regulator to withdraw a proposed measure due to lack of compatibility with EU law.

More information on the so-called "Article 7" procedure can be found at:

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

See also MEMO/08/620


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