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Oxera responds to consultations on the updating and implementation of European telecommunications regulation to promote investment in very-high-capacity networks

As part of the measures fostering widespread high-speed and high-quality telecommunications connectivity in the EU, the European Electronic Communications Code (‘the Code’), adopted in late 2018, provides an updated regulatory framework aimed at creating a pro-competitive and pro-investment regulatory environment for very-high-capacity networks (VHCNs).

The European Commission and the Body of European Regulators for Electronic Communications (BEREC) recently issued consultations on the introduction of further guidance and updated recommendations for national regulatory authorities (NRAs) to assist them in applying the Code in a way that supports these objectives.

Oxera has provided its response to these consultations, providing valuable contributions to the debate on the tools available to regulators to promote investment in VHCNs while also protecting consumers from the risk of excessive prices.

We submitted a response to both:

In our responses to these consultations, we highlight the importance of a clear and consistent analytical framework to assess, quantify, and reward risky investments in VHCNs . We provide details of a framework developed by Oxera, based on core principles of economics and finance theory, that honours the principle of the ‘fair bet’.

We provide further detail on how the fair bet framework can be applied to operationalise many of the Code’s objectives and the core principles of the existing recommendations. In particular, the fair bet framework allows for a holistic assessment of both systematic and non-systematic risk premia for NGA, as well as allowing for the assessment of price differentials based on differences in risk (relevant for both co-investment models and commercial pricing decisions by vertically integrated SMP operators).

A central tenet of the fair bet framework is understanding the risks faced by investors in VHCNs, and taking these into account when imposing any restrictions on the lifetime returns of an investment— for example, through the introduction of price controls. This requires regulators and private operators to engage in a productive dialogue to understand the nature of the risks that such operators are facing (due to demand, cost and regulatory uncertainty), and to provide clarity on how risks will be taken into account when designing regulatory interventions, even where regulation follows an initial period of pricing flexibility.

In this respect, a key message for the Commission and BEREC to make clear in any updated guidance is that regulators need to take appropriate account of the opportunities and risks faced by investors, and honour the principle of the fair bet over the lifetime of the investments.

Our responses to the consultations will be made public by the European Commission and BEREC in due course. Oxera has also written about these issues elsewhere, including in Agenda in focus and in an article for the International Institute of Communications.

For further details on our responses, or to discuss issues related to these topics, please contact:

Felipe Florez Duncan

Michael Weekes