Brussels, 12 December 2013
Commission formally requests Italian telecoms regulator to amend or withdraw its proposal for wholesale broadband price reductions
The European Commission has formally requested the Italian telecoms regulator (AGCOM) to withdraw or amend its proposal for the prices applicable to wholesale broadband access throughout 2013. These access prices are the fees that the dominant operator, Telecom Italia, can charge other operators who want to sell broadband services based on Telecom Italia's copper access network.
After three months of analysis and taking utmost account of BEREC´s opinion which, in the Commission´s view, did not provide any substantial new arguments in addition to those of AGCOM, the Commission still considers that AGCOM has set these fees on the basis of inappropriate data and that the way they are calculated has the potential to harm broadband investment incentives for both Telecom Italia and other operators.
The Commission considers that AGCOM's selective updating of the parameters of the cost model used to set regulated broadband access prices (namely by adapting repair maintenance costs and commercial costs while not updating the return on capital, commonly known as Weighted Average Cost of Capital or "WACC") leads to an unjustified regulated price reduction for the year 2013. In the Commission's view, this approach does not provide the regulated operator with a reasonable return on its investment in broadband networks, nor does it give an appropriate price signal for alternative infrastructure investments. Ultimately, it is likely to be detrimental to an efficient investment in NGA networks by both types of operators.
On the other hand, the Commission is now satisfied with AGCOM's clarification that stakeholders were informed of AGCOM's change of approach to calculating the access prices.
The Commission therefore recommends that AGCOM updates its fee calculations (WACC) on the basis of available up-to-date data, in a way that more accurately reflects persistent market developments affecting the risk-free (sovereign) rate and equity risks and, more generally, the need for stable, transparent and predictable wholesale broadband access prices over time, avoiding significant fluctuations and shocks.
The Commission first warned AGCOM in August (see IP/13/774) that its planned measure may not be compatible with EU telecoms rules, since the proposed prices for 2013 were based on a market review conducted for the 2009-2012 period. Some of the doubts initially underlined in the August letter were addressed during the three-month in-depth investigation, in particular the question whether market players were sufficiently informed of AGCOM's planned changes. However, the Commission maintains its serious concerns regarding the inappropriateness of the regulated broadband access prices calculation for 2013.
European Commission Vice President Neelie Kroes said: "Regulation which does not allow the regulated operator a return on investment will certainly not help deliver modern networks to EU citizens. Regulation needs to be based on sound economic methods, up to date data and reflective of market developments to ensure that both regulated and alternative operators have the right incentives to invest in new technology and competition is not distorted".
Any new measure should also take account of the Commission's Recommendation on non-discrimination and costing methodologies to promote competition and enhance the broadband investment environment (see IP/13/828 and MEMO/13/779).
This is the tenth time that the Commission has issued a recommendation under Article 7a of the Telecoms Directive (MEMO/10/226).
EU telecoms rules require Member States to promote competition and the interests of consumers in the EU, as well as the development of the Single Market.
Article 7 of the Telecoms Framework Directive requires national telecoms regulators to notify the Commission, the Body of European Regulators for Electronic Communications (BEREC) and telecoms regulators in other EU countries, of the measures they plan to introduce to solve market problems.
Where the Commission has concerns as to the compatibility of the proposed regulatory obligations with EU law, it can open an in-depth, or so-called Phase II, investigation, under the powers of Article 7a of the Framework Directive. It then has three months to discuss with the relevant regulator, in close cooperation with BEREC, how to amend its proposal in order to make it compliant with EU law. If, at the end of this investigation, divergences in the regulatory approaches of national regulators for remedies persist, the Commission may adopt further harmonisation measures, in which the Commission can require the national regulator in question to amend or withdraw its proposed measure.
The Commission's letter sent to the Italian regulator will be published at:
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