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IP/08/2060

Brussels, 24rd December 2008

Telecoms: Commission clears amended nationwide Spanish broadband regulations; maintains concerns on lack of high-speed remedies

The European Commission has, with reservations, given its green light to the Spanish draft regulation on wholesale broadband access, notified by the Spanish regulator, the Comisión del mercado de las telecomunicaciones ("CMT") on 4 December 2008. The Commission believes that the revised version of the draft measures addresses some of the issues on which the Commission had expressed serious doubts (IP/08/1704). However, the Commission still believes that regulation of wholesale broadband access should not be limited to speeds of up to 30 Mb/s. On the basis of the Commission's presently limited powers of oversight, it can only invite the CMT to change its regulatory approach in this regard.

Competition Commissioner Neelie Kroes said: "I welcome CMT's efforts to address the Commission's serious doubts. We need to ensure that alternative operators can compete effectively with Telefónica while setting the right incentives for investments in new generation networks. This would result in more innovation and better prices for consumers."

"Today we have once again seen the importance of having better instruments to ensure effective competition in the single market," said Viviane Reding, the EU Telecoms Commissioner. "This outcome reaffirms the Commission's commitment to make speedy progress with the reform of the EU Telecoms Rules to ensure that operators from different EU countries are treated fairly when seeking access to the network of a dominant national player."

On 13 November, the Commission informed the CMT about its serious doubts regarding the definition of the wholesale access market in the Spanish draft broadband regulation (IP/08/1704). The Commission considered that CMT provided insufficient evidence to support the exclusion of speeds above 30 Mb/s from the market. Moreover, the Commission considered that the evidence provided by CMT did not warrant the inclusion of alternative infrastructures - cable and local loop unbundling ("LLU") - in the market definition. The geographic differentiation of remedies was also queried.

On 4 December, the CMT notified a revised version of the draft measures. The amended text no longer defines the relevant product market with regard to the 30 Mb/s speed limit and excludes cable and LLU from the relevant market. The latter is justified by the weak competitive constraints that cable and LLU exercise on Telefónica at the retail level, even in densely populated areas, which reinforces the conclusion that the relevant geographic market is national. Also, the CMT no longer differentiates remedies geographically.

The Commission welcomes these changes and considers that the amendments introduced by the CMT to its original notification remove the serious doubts regarding the market definition of the proposed regulation.

However, the Commission maintains certain concerns about the remedies proposed by the CMT. Although CMT had defined the relevant market as including all speeds, it proposes to impose wholesale broadband access only for speeds of up to 30 Mb/s. The Commission considers that there is a risk that this could hinder the competitive process in Spain, as there is no evidence that entrants will be able to match the large-scale fibre deployment plans of Telefónica in the near future. With a fibre-based wholesale broadband access product which is limited in speed, Telefónica could pre-empt the market for retail broadband services during the deployment of fibre in Spain. To prevent this from happening, the Commission invites the CMT to impose remedies for wholesale access products also in excess of 30 Mb/s.

Under current EU Telecoms Rules, the Commission can veto an incorrect market analysis by a national regulator, but not an incorrect remedy. Therefore, in the present case, while the Commission was able to tackle effectively the 30 Mb/s threshold at the level of the market definition, it is limited to expressing concerns regarding a remedy having an equivalent outcome. The Commission's proposals to reform the EU's Telecoms Rules would allow it to act also when remedies proposed by a national regulator threaten to hamper the efficient functioning of the single market.

Background

Broadband is currently regulated in all EU Member States by national telecoms regulators. Operators holding significant market power are required to provide access to their networks to enable consumers to choose between broadband providers.

In accordance with the EU's Telecoms Rules, where a national regulator 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).

National regulators are required to notify their regulatory proposals to the Commission and other national regulators under the the so-called Article 7 procedure, see MEMO/08/620). The Commission and other national regulators may make comments such draft measures. In certain cases (concerning market definition and analysis), the Commission may also, following in-depth investigation, require a regulator to withdraw a proposed measure due to lack of compatibility with EU law.


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