Finding an appropriate regulatory framework for NGA networks has long been an extensively debated issue for European regulators. These networks are seen as a key driver of wider economic growth—given the increasing speeds and new services that can be provided over them—but regulators often struggle to design a framework that can address the trade-off between promoting competition, while at the same time providing sufficient incentives to actually invest in new fibre-based networks.
Oxera’s advice cut through this complexity and allowed ComReg to design a future-proof framework to regulate the wholesale prices of eircom’s (the incumbent fixed line operator in Ireland) new fibre-to-the-cabinet (FTTC) network.
First, Oxera assessed whether price regulation is required at all, and, if required, what type of price regulation would be proportionate in Ireland. Critically, Oxera concluded that a conventional ‘cost-based’ price regulation would not make economic sense in Ireland, where UPC, the cable operator, has been gaining market shares at an increasing pace. To maintain and promote further competition, ComReg followed Oxera’s recommendation and introduced a ‘margin squeeze test’. The remedy is designed to preserve market entry while not putting disproportionate constraints on eircom’s retail or wholesale pricing. The regulation also ensures consistency in the pricing of current and next generation wholesale products. ComReg’s approach was welcomed by eircom, with the incumbent praising ‘the regulatory certainty’ achieved through ComReg’s new approach.
ComReg’s decision is also timely from a European perspective, as the European Commission has recently issued a Draft Recommendation on non-discrimination and costing methodologies aimed at promoting competition and enhancing the broadband investment environment.
Felipe Flórez Duncan, Head of Oxera’s Communications team, commented:
‘The coherent framework designed by Oxera and applied by ComReg can set the pace for national regulatory authorities in other Member States as they grapple with the complex issue of how to regulate the industry in the transition from copper to fibre networks. Oxera’s report tackles this issue from first principles, setting out appropriate pricing methodologies that can be adjusted to meet particular market conditions in different Member States.’
View the full report.
In addition to the NGA decision, ComReg has published a decision on the regulation of bundled offers—also supported by Oxera and accompanied by a separate Oxera report. This is a key decision as both current and next generation telecoms services are increasingly sold as bundles encompassing voice, broadband and sometimes TV and other adjacent services. In all, ComReg’s recently published decisions provide a coherent basis for fixed access regulation in Ireland for years to come.