The new electronic communications and digital infrastructure regulatory framework: what does the economic evidence say? (Part 1 of 2)

On Thursday 23 October in Brussels, Oxera hosted a roundtable discussion entitled ‘The new electronic communications and digital infrastructure regulatory framework: what does the economic evidence say?’. In the first of a two-part series, we share insights from this productive debate.

The discussion took place in the context of an increasing focus on the need for change in how the electronic communications and digital infrastructure sector is regulated, building on the themes of the European Commission’s White Paper on ‘How to master Europe’s digital infrastructure needs?’,¹ the Letta report² and the Draghi report.³ All of these reports identify digital infrastructure as a strategic asset for Europe’s economic sovereignty and competitiveness, and argue for less fragmented regulation, a simplification of the rules, and a more investor-friendly environment. But what does this mean in practice? How should the regulatory framework adapt to support these goals, while preserving the competitive environment that it has facilitated?

Oxera’s roundtable, held under the Chatham House rule, stimulated a lively and engaging debate among 30 senior stakeholders including senior members of the European Commission (DG Connect), the Body of European Regulators for Electronic Communications (BEREC), national regulatory authorities, telecoms operators and key digital players.⁴

The event was opened by Oxera Partner Felipe Flórez Duncan , with Principal Michael Weekes chairing session 1 entitled ‘The future of ‘significant market power’ (SMP) regulation’ and Senior Adviser Johan Keetelaar chairing session 2 entitled ‘The economics of the wider internet value chain—to regulate, deregulate or stimulate?’. The full briefing paper for the event can be found here.

This article focuses on the discussion from session 1. It explains some of the challenges and proposals for adjustments to the SMP regulatory regime and access regulation, summarising the key points that emerged from the roundtable discussion. A subsequent article will focus on the discussions from session 2, on the interplay between traditional electronic communications providers and ‘content application providers’ (CAPs) on issues such as the Open Internet regulation.

The anticipated next step is that the European Commission will publish its draft Digital Networks Act in January 2026, which is expected to provide initial answers to many of the questions discussed at the event.

Proposals for reform

For over 20 years, ex ante regulation of electronic communications in Europe has been enabled by the SMP regime—launched in 2002⁵ and revised most recently in 2018 in the European Electronic Communications Code (EECC).⁶

By some metrics, the regime to date has been a success. It has: driven investment (enabling investment in next generation networks, with very high capacity network (VHCN) coverage currently standing at over 82.5%);⁷ delivered competitive outcomes for consumers in terms of lower prices and increased choice; and enabled the gradual reduction of regulation over time (the number of markets recommended as susceptible to ex ante regulation has reduced from 18 to two since 2002).

However, despite these observations at an aggregate EU level, the Letta report highlights that disparities across member states ‘in terms of investments, organization, industry and market development…’ add challenges to ‘address[ing] connectivity needs’ and closing the ‘considerable investment gap’ to meet connectivity targets across the EU. Furthermore, Letta notes that ‘[t]he residual fragmentation in rules and industries at the National level hinders a crucial final step towards a Single Market for Electronic Communications’.⁸ Moreover, the Draghi report highlights that ‘Regulation and competition policy in the telecom sector have in fact disincentivised consolidation, favouring a multiplicity of smaller players in each market. In the EU, “ex ante” regulation – e.g. to prevent undesirable price effects – and EU and national competition policies have all favoured a plurality of players and low consumer prices’, which could be holding back the ‘substantial investment in private infrastructure’ that is needed to achieve the EU’s Digital Decade 2030 goals.⁹

Therefore, while there has been significant and positive change in the sector in the last 20 years, given the positioning of the Draghi and Letta reports, and as recognised in the White Paper, the Commission is reviewing whether the regulatory framework is appropriate for the future. The Commission has identified this as ‘an opportunity to simplify and further harmonise the legal framework, with a view to reinforce competitiveness and to foster a more integrated single market’.¹⁰ In its Digital Networks Act Call for Evidence, the Commission laid out two specific proposals on possible reforms to SMP access regulation: (1) applying ex ante regulation only as a safeguard after assessing symmetric measures; and (2) introducing a pan-EU harmonised access product as a default remedy imposed on operators with SMP^.11

This reflects (1) a continuation of the ambition to remove ex ante (SMP) regulation where feasible, allowing competition to drive investment and innovation, while relying on competition law as a backstop—and a reflection that, in some member states or areas, the moment to do so may be approaching; and (2) a way to address the critique that regulatory remedies have been applied inconsistently across member states, contributing to fragmentation and preventing pan-EU strategies.

These proposals guided the discussion during the first session of our roundtable.

Symmetric and asymmetric regulation: complements not substitutes

Symmetric regulation is a regulatory approach in which the same rules and obligations are applied equally to all firms or entities operating in a market, regardless of their size, market power or historical position. This differs from asymmetric regulation, in which obligations are imposed only on operators that possess SMP.

On the relative roles of symmetric and asymmetric regulation, the Commission’s proposals suggest a potential shift towards prioritising symmetric regulation, with asymmetric (SMP-based) regulation becoming more of a backstop.

Symmetric regulation can be justified where replication of network elements would be economically inefficient or physically impracticable. Typically, this relates to the physical infrastructure access (PIA) layer of telecoms networks, including ducts, poles, masts, towers, manholes and cabinets, and can extend to elements owned by utilities. Symmetric access obligations, such as those promoted by the Gigabit Infrastructure Act (GIA), aim to lower barriers to deploying high-speed electronic communications networks by making it easier and cheaper for operators to use existing infrastructure. Symmetric access has led to good outcomes in several jurisdictions. For example, in Malta and Bulgaria, access to physical infrastructure has supported network roll-out, while Spain, Portugal and France—three countries that rank among the most advanced Fibre-to-the-home (FTTH) deployers, with respect to FTTH coverage, in Europe—have focused policies on the reuse of civil infrastructure.

In contrast, asymmetric obligations, in addition to passive infrastructure, typically mandate access at more active levels that require less investment from access-seekers. Furthermore, pricing for symmetric access obligations is typically offered on ‘fair, reasonable and non-discriminatory’ (FRAND) terms, whereas asymmetric obligations have historically been accompanied by cost-based price controls. Hence, at the heart of this debate—and seen in light of the position set out in the Draghi report—is the question of whether greater focus on symmetric access obligations can encourage more investment in own infrastructure, with reduced focus on ‘low’ prices.

At the roundtable, there was acknowledgement that symmetric regulation establishes a level playing field across operators. However, the discussion also made clear that symmetric regulation alone is not sufficient in all circumstances. Several key points emerged, as follows.

First, while symmetric access can be pro-investment by lowering barriers to entry and the costs of roll-out, the guidance, monitoring and enforcement of prices for symmetric access is also important. Indeed, symmetric access obligations could dampen private investment incentives if access rules are not balanced to reward risk-taking and cost recovery. Therefore, the specifics of implementation matter.

Second, the simple presence of symmetric regulation—focused on non-replicable network elements—does not necessarily remove the need for additional, asymmetric/SMP regulation.

The presence of a well-functioning PIA market, facilitated by symmetric access regulation to physical infrastructure, may—in some cases—be sufficient to address the competition issues in the market. However, the question that should always be asked is whether any single operator (or operators) still has the ability and incentive to foreclose rivals, to the detriment of competition, including on any telecoms-specific PIA under the control of the SMP operator(s). For example, in rural or low-density areas, natural monopoly characteristics mean that only one operator may find it viable to deploy or offer end-to-end services, requiring asymmetric regulation where there is SMP. Moreover, a significant share of EU households will be served by only one operator, necessitating a framework that enables regulators to take targeted action ex ante.

Overall, multiple participants emphasised that symmetric and asymmetric measures are complements, not substitutes.

Scope for de-regulation: defining ‘sustainable competition’

Even in areas where there are multiple parallel networks, competition between those networks may not yet be ‘effective’ and ‘sustainable’, and there may therefore remain a case for asymmetric regulation to be imposed on an SMP operator.

Where there are parallel networks, competition will be effective only if there are rivals that exert a sufficient competitive constraint on the incumbent, such that it is unable to act independently when making decisions about how to set wholesale prices and/or quality (i.e. through its investment decisions).

However, even then, the presence of effective competition on its own is arguably not sufficient to justify deregulation. This is because there is a risk that the competitive constraint imposed on the incumbent by alternative network operators (altnets) may weaken in the future.

National regulatory authorities (NRAs) must be assured that the presence of effective competition could be sustained in the absence of the competitive safeguards provided by regulation. If not, there is a risk that the effective competition identified will be transient—i.e. that the incumbent may be able to restore its market power following deregulation.

The roundtable discussion highlighted that, while the ‘number of network operators present’ criterion is often a focus point, this is not, in itself, a sufficient measure of effective competition. A broader assessment is needed of: the presence of direct constraints (from competing wholesale offers) or indirect constraints (arising from the presence of an altnet with a strong retail market position); evidence of competing commercial wholesale access agreements (backed up by evidence of material take-up); the overall network presence of the alternative networks (to assess the strength of the constraint imposed on the incumbent); and the degree of uniform pricing constraints.

The UK’s experience was referenced as instructive. Despite highly effective SMP-based PIA regulation since 2011 enabling extensive network deployment—with a large share of the UK having a choice of full-fibre providers—nowhere in the UK has (yet) been identified by Ofcom as being effectively and sustainably competitive.¹² This raises an important question: what does sustainable competition actually mean, and when can competition be considered sustainable?

Adapting regulatory remedies: from exploitative to exclusionary concerns

If we accept that a finding of SMP, and therefore a need for asymmetric remedies, also arises from a lack of ‘effective’ and ‘sustainable’ competition, even in the presence of parallel networks, what should be the focus of regulatory remedies?

At the roundtable, there was discussion about the need to look at the risk of both excessive prices (in areas with limited competition) and increasingly low, potentially predatory, prices (in areas with emerging competition). The point was made that deregulation may actually require more regulatory safeguards in the short run to ensure that the tricky phase, where entrants are developing, proceeds smoothly, with a focus on ensuring the emergence of long-term sustainable competition. This requires an acknowledgement of what the competition concern to be addressed is (and how it has shifted from the previous focus of regulation), and what constraints should be imposed on pricing to mitigate those concerns.

The shift in competition concerns

Where alternative wholesale network operators are present but competition is not yet fully established, the competition concern shifts away from one of potential exploitative behaviour of the SMP operator (i.e. setting access prices ‘too high’ to the detriment of access-seekers and ultimately end-users) to one of exclusionary behaviour towards rival wholesale network operators in an attempt to dampen infrastructure competition. Specifically, such behaviour would affect the entry and expansion plans of altnets that would prevent the market from becoming effectively competitive, and would enable de-regulation.

Putting constraints on pricing flexibility

Recent regulatory practice has seen a trend away from strict cost-based price controls and towards varying degrees of pricing flexibility to avoid undermining investment incentives. However, regulators are now beginning to impose ex ante regulatory constraints on the degree of pricing flexibility, particularly where it involves the lowering of prices or offering of discounts linked to certain conditions.

Two notable examples illustrate this approach.

In 2021 in the UK, Ofcom introduced regulatory restrictions on Openreach’s ability to apply geographic discounts and conditional discounts that would deter network build by alternative operators. Openreach must notify Ofcom of certain commercial terms 90 days in advance, and Ofcom assesses whether they create barriers to access-seekers using alternative networks, only permitting them if the impact on nascent competitors is unlikely to be material and the arrangements generate clear and demonstrable benefits for investment in fibre and/or for consumers.¹³

Similarly, in 2024 in Ireland, ComReg introduced a pre-approval regime for promotions and discounts on wholesale FTTH pricing of the SMP operator. ComReg will not approve promotions or discounts unless: the proposed price remains above a defined price floor; the offer does not favour the SMP operator’s retail arm; it is not targeted at a specific geographic area; and it will not adversely affect investments by alternative wholesale network operators.¹⁴

Pan-European harmonisation versus national flexibility

At the roundtable, achieving the single market was described as critical, yet the current situation is one of distinct national markets with diverse regulatory approaches, which lends some support to the need for greater harmonisation. Several participants noted that the current situation creates significant challenges for pan-European operators. One example that was highlighted was of an operator that is present in 27 countries needing to adjust commercial agreements in different national markets to reflect regulatory differences, adding complexity, and contracts must be amended or renegotiated if regulation changes.

However, significant concerns were raised about whether a one-size-fits-all approach—in respect of a proposed single pan-EU access remedy—was the right way of achieving a more harmonised approach. For example, it was noted that any remedy ought to be linked to a specific competition concern or particular bottleneck in order to be effective, and such concerns may vary across member states, meaning that it is likely that a single remedy would be too inflexible to be effective.

Multiple participants emphasised that flexibility is the key strength of current regulation, as it allows NRAs to deal with issues that are specific to their markets. There is a mixed picture across member states—countries have a range of situations, regulators use different tools and models, and some countries have fully deregulated while others are backtracking or advancing. This suggests that a uniform approach may not be appropriate.

A preference of some participants (although not all) was for NRAs to continue to have access to a comprehensive toolbox of regulatory instruments that they might not need to fully implement, rather than having insufficient tools to address market-specific issues. The focus would then need to be on greater guidance or more active involvement from the Commission to enforce common approaches and consistent application of the toolkits across NRAs.

Key takeaways

The roundtable discussion made it clear that the future regulatory framework must balance several competing objectives: fostering investment and innovation, ensuring effective and sustainable competition, promoting single market integration, and maintaining regulatory flexibility to address market-specific circumstances.

Three key messages emerged from both the briefing paper and the roundtable discussion.

First, symmetric and asymmetric regulation are complements, not substitutes. While symmetric access can play an important role in lowering barriers to entry and facilitating infrastructure roll-out, it cannot replace the need for asymmetric regulation where SMP exists or where competition is not yet effective and sustainable.

Second, clarity is needed on what ‘sustainable’ competition looks like. The presence of multiple networks is not sufficient, by itself, to justify deregulation. A broader assessment is required, and regulators need confidence that competitive constraints will be sustained in the absence of regulation. The current SMP framework can accommodate such assessments, but may benefit from additional guidance to ensure consistency across member states.

Third, the focus of regulation needs to adapt to protect against exclusionary practices (as well as the exploitative practices focused on historically). Where infrastructure competition is emerging but is not yet fully established, regulatory remedies should be designed to prevent incumbents from engaging in exclusionary behaviour that could dampen competitive entry and expansion.

As the Commission prepares its Digital Networks Act, the challenge will be to simplify and harmonise regulation where appropriate, while ensuring that NRAs retain the flexibility and tools that are necessary to address market failures and promote effective, sustainable competition in their specific national contexts. The economic evidence and regulatory experience suggest that this balance is achievable, but requires careful calibration rather than wholesale shifts from one regulatory paradigm to another.