Deregulation and Consumer Welfare on the ...€¦ · Deregulation and Consumer Welfare on the...

DeregulationandConsumerWelfareontheTelecommunicationsMarket

BreakfastDebateonInvitationoftheFederationofGermanConsumerOrganisations(vzbv)on22November2017

incooperationwith

Prof. Dr. JörnSickmann

BreakfastDebate22November2017 2

Deregulation and ConsumerWelfare incooperation withProf.Dr.JörnSickmann

Keyaspectsofthestudy

Analysisoftheexpectedeffectsofdifferentpolicyoptionsonmarketconcentrationandfinallyonconsumers

FocusonGermantelecommunicationsmarket

Backgroundofthestudy

Art.74oftheproposalforanEuropeanElectronicCommunicationsCode:Deregulationofnewnetworkelementsdeployedonthebasisofaco-investmentoffer(undercertainconditions)

FederalMinistryforEconomicAffairsandEnergy,WhitePaperonDigitalPlatforms:Regulatoryexemptionsfor„newmarkets“beyondco-investments(undercertainconditions)

DeutscheTelekomAG:Fullderegulationoffibreaccessnetworks



CurrentsituationinGermany(or:Therearealwaystwosidestoeverystory)Brightside:Germanyisnotlaggingbehindinthebroadbandage

Germanytakesthe7th placeforbroadbanduptakeintheOECD,aheadofGreatBritain,theUSAandJapan

Source:OECD,BroadbandPortal,Figure1.2.1,12/2016

Traditionalaccessnetworksareavailablealmosteverywhereandareusedintensively RolloutofNGAnetworksisalsoprogressing

NGAnetworks(FTTP,VDSLandDOCSIS3.0)availablefor82%householdsoveralland49%inruralareas(EU:76%/40%)

Source:Commission,Europe’sDigitalProgressReport2017,p.8etseq.,6/2016



Competitionhasgrownandisstillgrowing

CurrentsituationinGermany(or:Therearealwaystwosidestoeverystory)Brightside:Germanyisnotlaggingbehindinthebroadbandage

MarketshareofnewentrantsforfixedbroadbandsubscriptionsinGermanycorrespondstotheEUaverage

Source:Commission,Europe’sDigitalProgressReport2017,p.24,7/2016

Retailpriceleveliscompetitive,includingpriceforhigherbandwidthproducts

Fixedbroadbandretailprices(EURPPP)forstandaloneoffersare(slightly)belowEUaverage(autumn2016)

Source:Commission,Europe’sDigitalProgressReport2017,p.31,autumn2016



Ruralareaslagbehind

CurrentsituationinGermany(or:Therearealwaystwosidestoeverystory)Darkside:ShortcomingsinruralareasandwithregardtoFTTH/B…

Broadbandcoverage>50Mbpspoorinruralareas

Source:TÜVRheinland,Bericht zum Breitbandatlas Ende 2016,Part1,2017,p.9

AvailabilityofFTTH/Bverylimited

Germanytakesoneofthelastranksregardingfibreaccessnetworks

Source:Commission,Europe’sDigitalProgressReport2017,p.10,6/2016

VDSL FTTH/B CATV

Urban 52,4 % 10,9 % 81,3 %

Semi-urban 40,0 % 2,2 % 49,4 %

Rural 21,4 % 2,1 % 14,8 %



Stilllowdemandforhighbandwidths,evenwhereavailable

CurrentsituationinGermany(or:Therearealwaystwosidestoeverystory)…but(andthisisabigbut)

Only30%ofFTTH/Bhouseholdspassedareinfactconnected

Source:DialogConsult/VATM,18.TK-Marktanalyse Deutschland2016,Figure14

SuccessiveandwidespreadrolloutoffibrecomponentsinHFC(DOCSIS3.0,3.1)andDSLnetworks(effectof„Vectoring“onfibrerollouttostreetcabinetsfor≥ 80%ofGermanhouseholds)

Regulationensuresphysicaloratleastvirtualaccesstotheincumbent‘saccessnetworkonanon-discriminatorybasis,includingfibreconnections



Wheredowe(wantto)gofromhere?Policyoptionsanalysed

BaselinescenarioResultsthatwouldbeexpectedinthefuturewithoutacorrespondingderegulationofcompanieswithsignificantmarketpower

Mostfar-reachingpolicyoptionCompletederegulationfor„pure“fibreopticalnetworks(FTTH/B)Assumptionthatregulatedaccesstocopperorequivalentwillbemaintained

IntermediatepolicyoptionScenarioclosesttoArt.74discussion

Fullderegulation

Statusquo

Deregulationlimitedtoco-investments



Analyticalmethodandparameters

Structure

NumberoffirmsMarketsharesandconcentrationMarketentrybarriers

Conduct

SingledominanceNon-coordinatedeffectsCoordinatedeffects

Performance

PriceQuantityAllocativeefficiencyConsumerwelfare

S-C-Pcategoriesusedasanorganisingschemefortheanalysisandnottoimplyadirectone-waychainofcausation.

Multimethodologicalandinterdisciplinaryapproach

Qualitativeanalysisincorporatingresultsfromempiricalandexperimentalliterature



Statusquoscenario(inanutshell)

Structure

SignificantnumberofcompetitorsCompetitionofdifferentaccesstechnologies(fibre,DOCSIS,upgradedcopper)Regulationenablescompetitionontheretailmarkets

Conduct

CompetitivebehaviourontheretailmarketsLevelofbroadbandprovisionwillevolveinlinewithdemandanddependingonconsumers’willingnesstopay

Performance

Competitivepricelevel(includingpricesforhighcapacityconnections)RolloutofNGA/fibreaccessnetworksdrivenbycompetitionanddemand(nooversupply)Differentiatedproductqualities

Effectonconsumerwelfare



Fullderegulationscenario(inanutshell)

Structure

AhigherdegreeofmarketconcentrationattheinfrastructurelevelislikelySignificantreductioninthenumberofprovidersattheservicelevelistobeexpectedRiskofremonopolisation ortheemergenceofverynarrowoligopoliesinlargepartsofGermany

Conduct

Singledominancepossible,evenincaseofaduopolyNon-coordinatedeffectslikelyintightoligopoliesduetospecificsofthecommunicationsmarketsEvenincentivesandpossibilitiesforimplicitcollusionpossible

Performance

RiskofhigherpricesNegativeimpactonbroadbandusageandmarketdiffusionpossibleAllocativeinefficiencies,„deadweightloss“andlossinconsumersurpluslikely

Effectonconsumerwelfare

Deregulation and ConsumerWelfare


incooperation withProf.Dr.JörnSickmann

Positiveeffectsoninvestments

Negativeeffectsoncompetition

Mostacademicliteraturesupportspositive(butlimitedinscope)effectoninvestments(e.g.Kirchner, 2009;Kühling/Heimeshoff/Schall,2010;Inderst/Kühling/Neumann/Peitz,2010;Inderst/Peitz, 2011;DotEcon,2012andBourreau/Cambini/Hoernig,2012).Inprinciple,co-investmentscanpositivelyornegativelyimpactcompetitionandresultinanincreaseoradecreaseofmarketconcentrationonboththeinfrastructureandtheservicelevel.Effectscharacterisedbyahighdegreeofcomplexity,dependonalargenumberofpossibleconstellationsandwillvaryfromregiontoregion.Evaluationdependsonthecounterfactual(statusquovs.fullderegulationscenario).Fromtheconsumer'spointofview,therecouldbeacertaintrade-offbetweenastrongerrolloutandan–howeverlimited– impedimenttocompetition(anditsadverseeffectsonconsumers).

Co-investments:Apossibletrade-off?



Structure:Potentialconcentrationreducingandcompetitionenhancingeffects

InfrastructureLevel

Positiveeffectsi.p.ifdeploymentwouldnotbepossiblewithouttheco-investmentagreements.- In„black“areaspositivebusinesscaseforfibrerolloutbycompetitorsmightexistinaspecific

regionbutpoolingfinancialresourcesandcustomerbasemightbenecessary.- In„grey“areasbypassinvestmentstocopperbottleneckinfrastructurecouldbeenabled.Positiveeffectsinprinciplealsopossibleifincumbentisinvolvedinco-investmentagreement,butprofoundcompetitiveassessmentnecessary.

Positiveeffectsexpectedwithregardtoco-investmentsforbasicinfrastructure(ductsetc.).Competitiveevaluationmorepositiveformultifibre comparedtopoint-to-point.

ServiceLevel Keypositiveeffectisthataccessto„insiders“isgrantedeveninabsenceofregulatedaccess(counterfactualoffullderegulation).

Evaluationdependsheavilyonspecificimplementation(e.g.“offer”vs.“agreement”,no.andtypeofinsidersrequiredforderegulation,competitivesafeguards).



Structure:Potentialconcentrationincreasingandcompetitionreducingeffects

InfrastructureLevel

Co-investmentscanpreventparallelnetworkdeployment.Incentivesexistbecauseofcostsavings.Canresultinestablishmentoffibre-basedmonopolisticbottlenecks.

Negativeeffectsifco-investmentsbeyondbasicinfrastructure(passiveandi.p.activenetworkelements).Morelikelyincaseofsinglefibre.

Negativeeffectsmorelikelyifincumbentisinvolved.

Overalltendencythatduplicationofinfrastructurewillbecomelesslikelyfindssupportinearlytheoreticalmodelstudies(Inderst/Peitz,2011).

ServiceLevel Mainnegativeeffectisthepossibilitytoexclude(orverticallyforeclose)„outsiders“.Canbeusedtomonopoliseifco-investment„offer“issufficient.

Evaluationdependsheavilyonspecificimplementationandoncounterfactual.Overall,increasingconcentration&reductioninno.ofmarketparticipantsexpectedifcomparedtostatusquoscenario.Higherno.ofcompetitorsandlowerconcentrationexpectedifcomparedtoscenarioofcompletederegulation.




RelevantifstrategicalmisusepossibletoescaperegulationLikelinessdependsonspecificdesignofrulesandcompetitivesafeguardsExpectedeffectsinprincipleanaloguetocompletederegulation

PossibleinoligopolymarketsandprobableifcertainconditionsmetInefficientoutcomeifconditionsof„Bertrand“violated

Gainsimportancei.p.duetoexpectedincreaseofconcentrationEconomiccriteriaforlikelinessofcoordination/analoguelegalcriteriaExplicitvs.implicitcollusion

Non-coordinatedeffects

Singlemarketdominance

Coordinatedeffects

Co-investments:Analysisofprobableconduct&performance

Relationship between prices and no.offirms under three market structures

Carlton/Perloff, 2015,p.294



Singlemarketdominance

Conduct Co-investmentoffersmightbeusedstrategicallytoescaperegulation.Asymmetricnegotiationpowercouldbeusedtocreateagreementconditionsunfavourabletocompetitionleadingtoquasimonopolyorsingledominancebelowmonopolythreshold.

Ifregulatoryframeworkonlyrequirescoinvestment „offers“,firmsmightofferunfavourableconditionsnotacceptabletoanypotentialcoinvestor gaininganunregulatedmonopolyposition.

Performance

Financialinvestorsasco-investorsmightnotsufficientlydisciplinethecommunicationsproviderastheywouldhaveeconomicincentivestoparticipateinapossiblemonopolyrent.

Allocative,productiveanddynamicinefficienciespossiblewherestrategiesaresuccessful.Potentialharmtoconsumers.



Non-coordinated(unilateral)effects

Inoligopolisticmarketseconomicinefficientmarketresultsarepossibleevenintheabsenceofanycoordination.

WhileallocativeefficiencywillresultunderthestrictassumptionsofBertrandpricecompetition,studyrevealsthattheseassumptionscannotbeconsideredasbeingfulfilledwithrespecttotheGermancommunicationsmarkets.Complementaryanalysisof„factorsfavourabletoinefficientoligopolyoutcomes“assuggestedbyBERECcomestosimilarconclusion.

Someconnectionto„oligopolyregulation“discussion,butdifferentargument.




Factor Effect ExplanationHigh supplysideconcentration üû Dependsonno.of „insiders“andexistenceofparallelinfrastructure.

Highmarketentrybarriers,nosign.potentialentrants

üü Economiesofscale,scopeanddensityinconnectionwithsunkcosts.

Highlevelofproductdifferentiation üû

„Connectivity“itselfratherhomogeneousandsubstitutional butdifferentiatedserviceoffers(upload&downloadspeed,latency,double, tripleplayoffers).Somewhatambivalent.

Maturetechnologies,i.e.littleincentivetoinnovate

üûInnovation & continuous technologicalprogress.However,alternativeaccesstechnologieswithcomparablequalitycharacteristicsnotto beexpected.

Capacityconstraints ûNo practicalrelevancewithregardtoinfrastructure,someconstraintsmightresultfromnecessaryadministrativeprocesses,billingetc.

Non-coordinatedeffects:Supplysidefactorsfavourabletoinefficientoutcomes




Factor Effect ExplanationNocountervailingbuyerpower üü Verylowconcentrationinmassmarketforbroadbandservices.

Lowprice-elasticity& cross-priceelasticities

ûElasticityatleastnot asextreme asassumedinBertrand.Somecustomerslockedintolongtermcontracts,someswitchingcosts(e.g.hardware).

Lowgrowthofdemand/maturemarket

üûTraditionalbroadband marketssaturated,„market“forfibrebroadbandstillestablishing,increasingdemandexpectedinthefuture.

Non-coordinatedeffects:Demandsidefactorsfavourabletoinefficientoutcomes



Conclusionnon-coordinatedeffects

Non-coordinatedeffectspossiblethatcouldresultininefficientmarketoutcomes.

Asexactno.ofcompetitorsandmarketsharesresultingfromderegulationofco-investmentscannotbedetermined,somedegreeofuncertaintywithregardtotherelevanceandstrengthofnon-coordinatedeffectswillremain.Differentmarketresultsalsodependonspecifictermsoftheagreementsandwilldifferfromregiontoregion.

Non-coordinatedeffectswouldbecomemorerelevantthelowerthenumberoffirms(both„insiders“and„outsiders“).Problemstobeexpectedi.p.induopolysituationsandintightoligopolieswith3-4competitors.



Coordinatedeffects

Analysisaboveabstractedfrompossibilitytocollude.Analysisgainscomplexityoftenacombinationofunilateralandcoordinatedeffectscanbeobserved.

Incentivestocoordinateexistinascenarioofderegulationforco-investmentsasjointmonopolyprofithigherthanoligopolyprofit(holdstrueregardlessofunderlyingoligopolymodel).

Whileexplicitcoordinationcannotbeexcludedcompletely,moreimplicitforms(„tacitcollusion“)morerealistic.

Influencefactorsonthelikelihoodandtheprobabilitytosucceedhavebeenderivedinindustrialorganisationliteraturebasedonrigorousgametheoreticalanalysis. Similar criteria have beenadopted incompetition law (Art.2Isubpara.2ECMergerRegulationNo 139/2004).ApplicationofthesefactorstoanalyseGermantelecomsmarkets.




Factor Effect ExplanationHigh supplysideconcentration üû Dependsonno.of „insiders“andexistenceofparallelinfrastructure.

Lowdemandsideconcentration üü Verylowconcentrationinmassmarketforbroadbandservices.

Informationexchange üüInformationexchange forco-investmentsaddstoalreadyexistingexchange inthecontextofinterconnection.

Highhomogeneity üû„Connectivity“itselfratherhomogeneous,butdifferentiatedserviceoffers.Somewhat ambivalent.

Highmarketentrybarriers üü Economiesofscale,scopeanddensityinconnectionwithsunkcosts.

Longduration/multiperiod game üü Verylongamortisationperiodsfornetworkinvestments.

Selectedfactorsfavourabletocoordination



Summarycoordinatedeffects

Analysisrevealscertainriskofcollusion.

Likelihooddependsonspecificcircumstances,incasesofalowno.ofinsiders&inabsenceofparallelnetworksriskcanberatherhigh.

Riskofcollusionacknowledgedineconomicliteratureandbyregulatoryandcompetitionauthorities(Feasey/Cave,2017;Bundeskartellamt,2010;BEREC,2012).

Experimentalevidencesupportsriskofcollusion(Krämer/Vogelsang,2017),butfurtherresearchmightberequired.



Co-investmentscenario(inanutshell)

Structure

Lessduplication&higherconcentrationatinfrastructurelevelSignificantreductioninno.ofprovidersatservicelevelpossible,dependingondetailsofagreements(openaccess,participationofincumbentetc.),regulatoryrulesandcounterfactualIfnotimplementedproperlyriskofremonopolisation oremergenceofverynarrowoligopolies

Conduct

Riskofstrategicabuseofinstrumenttoescaperegulation

Misusetogainunregulatedsingledominancepossibleif„offer“sufficient

Non-coordinatedeffectslikelyintightoligopoliesduetospecificsofthecommunicationsmarketsIncentivesandpossibilitiesfor(implicit)collusion

Performance

Riskofhigherprices&negativeimpactonbroadbandusageandmarketdiffusionpossibleifinstrumentnotimplementedproperly(includingcompetitivesafeguards)Riskofeconomicinefficienciesandlossinconsumersurplus

Effectonconsumerwelfarecouldbepositiveornegativedependingondetailsofimplementation



Requ

iremen

tsofgen

eral

compe

titionlaw(e

sp.A

rt.101

TFEU

)

Prohibitionofagreementspreventing,restrictingordistortingcompetition

Exceptionallypermittedwhenimprovingtheproductionor

distributionofgoods

whileallowingconsumersafairshareoftheresultingbenefit

withoutimposingunnecessaryrestrictionsontheundertakingsconcerned

andwithoutaffordingthepossibilityofeliminatingcompetition.

Co-investments:Resolvingthetrade-off...withgeneralcompetitionlaw?

Safeguardsoutsideregulation

Highdegreeofuncertainty

Riskofirreversibleharmtocompetition



Co-investments:Resolvingthetrade-off...withArt.74oftheECC?

Commonissues Commission‘sproposal Council‘sposition Committeereport

Thegood stuff • Possibilityto participateunderfair,reasonableandnon-discriminatoryterms(andothersafeguardsforcompetition)

• Protectionofoutsidersonafallback level

• Explicitpossibility ofinterventionregardingtheco-investmentoffer

• Actual conclusionofanagreementisnecessary

• Atleastsomeco-investorsmustbeorintendtobe(ortohost)serviceproviders

Theambiguousstuff • Possibilitytojointheagreementlater(keepingcompetitionopenvs.reducingincentivestobearrisksatanearlystage)

• Obligatoryexemption(legalcertaintyvs.flexibilityandsafeguardforcompetition)

• Obligatoryexemptionwiththe optionforexceptionalregulation(flexibilityandsafeguardforcompetitionvs.legalcertainty)

• Optionalexemption(flexibilityandsafeguardforcompetitionvs.legalcertainty)

Thebadstuff • Participation andleadingroleoftheSMPoperator

• Verycomplex(andstillpartly vaguewording)

• Co-investmentofferprobablysufficient

• Extremelycomplex• Co-investmentoffer

probablysufficient



Co-investments:Resolvingthetrade-off...withinthesystemofmarketregulation

Co-investmentagreementsmayalreadybetakenintoaccountateverylevelofmarketregulation:tendencytowardseffectivecompetition,SMP,remedies.

Thisallowsaflexibleassessmentoftherespectiveagreementinthelightofthespecificmarketsituation...

...whileatthesametimefacilitatinglegalcertaintybytheexantecharacterofmarketregulation.

LeavingthedecisiontotheNRAs(embeddedintheconsolidationproceduresatEUlevel)wouldcomplywiththeoverallframeworkofmarketregulation.

Furtherguidance–ifrequired– ispossiblebyBERECguidelinesand/orCommissionrecommendations(potentiallyonthebasisofAnnexIVofthecurrentproposals).

➤ Betterdon‘ttoucharunningsystemwhenyou‘renotsurethatthealternativewillworkbetter!



Thankyouverymuchforyourattention!



Contactinformation

AndreasNeumann

InstitutefortheLawofNetworkIndustries,InformationandCommunicationsTechnology(IRNIK)Rheinweg 6753129BonnGermany

[email protected]

Prof. Dr. JörnSickmann

[email protected]



1.Anationalregulatory authority shall notimpose obligations as regards new network elements thatare part of the relevantmarket onwhich it intends to impose or maintain obligations inaccordancewith Articles 66and Articles 67to 72and that the operator designated as significant market poweronthat relevantmarket has deployed or is planning to deploy,if the following cumulative conditionsare met:

(a)the deployment of the new network elements is opento co-investmentoffers according to atransparentprocess and onterms which favour sustainable competition inthe long term including inter alia fair,reasonableand non-discriminatory terms offered to potentialco-investors;flexibility interms of the value and timing of thecommitment provided by each co-investor;possibility to increase suchcommitment inthe future;reciprocalrights awarded by the co-investorsafterthe deployment of the co-invested infrastructure;(b)the deployment of the new network elements contributes significantly to the deployment of very highcapacity networks;(c)access seekers notparticipating inthe co-investmentcan benefit from the samequality,speed,conditions andend-userreach as wasavailable before the deployment,either through commercial agreements based onfairandreasonable terms or by means of regulated access maintained or adapted by the nationalregulatory authority;

When assessing co-investmentoffers and processes referred to inpoint (a)of the first subparagraph,nationalregulatory authorities shall ensure that those offers and processes comply with the criteriaset outinAnnexIV.

Backup:Art.74of the Commission‘s proposal for anECC(COM[2016]590final)



When assessing aco-investmentoffer pursuant to Article 74(1)(d),the nationalregulatory authority shallverify whether the following criteria have been met:

(a)Theco-investmentoffer shall be opento any undertaking over the lifetime of the network built under aco-investmentoffer onanon-discriminatory basis.TheSMPoperator may include inthe offer reasonableconditions regarding the financial capacity of any undertaking,sothat for instance potentialco-investorsneedto demonstrate their ability to deliver phased payments onthe basis of which the deployment is planned,theacceptance of astrategic planonthe basis of which medium-termdeployment plans are prepared,etc.

(b)Theco-investmentoffer shall be transparent:

• the offer is available and easily identified onthe website of the SMPoperator;

• full detailed terms mustbe made available without undue delay to any potentialbidder that hasexpressed aninterest,including the legalformof the co-investmentagreement and - when relevant- theheads of term of the governance rules of the co-investmentvehicle;and

• Theprocess,likethe road map for the establishment and development of the co-investmentprojectmustbe set inadvance,it mustclearly explained inwriting to any potentialco-investor,and allsignificantmilestones be clearly communicated to allundertakings without any discrimination.

(c)Theco-investmentoffer shall include terms to potentialco-investorswhich favour sustainable competitioninthe long term,inparticular:

• Allundertakings have to be offered fair,reasonable and non-discriminatory terms and conditions forparticipation inthe co-investmentagreement relativeto the timethey join,including interms of financialconsideration required for the acquisition of specific rights,interms of the protection awarded to the co-investorsby those rights both during the building phase and during the exploitation phase,for exampleby granting indefeasible rights of use (IRUs)for the expected lifetime of the co-invested network and interms of the conditions for joining and potentially terminating the co-investmentagreement.Non-discriminatory terms inthis context donotentail that allpotentialco-investorsmustbe offered exactlythe sameterms,including financial terms,butthat allvariations of the terms offered mustbe justified onthe basis of the sameobjective,transparent,non-discriminatory and predictable criteria suchas thenumber of enduser lines committed for.

• Theoffer mustallow flexibility interms of the value and timing of the commitment provided by each co-investor,for example by means of anagreed and potentially increasing percentage of the totalenduserlines inagiven area,to which co-investorshave the possibility to commit gradually and which shall be setataunit level enabling smaller co-investorsto gradually increase their participation while ensuringadequate levels of initialcommitment.Thedetermination of the financial consideration to be providedby each co-investorneeds to reflect the fact that early investors accept greater risks and engage capitalsooner.

• Apremiumincreasing over timehas to be considered as justified for commitments made atlater stagesand for new co-investorsentering the co-investmentafterthe commencement of the project,to reflectdiminishing risks and to counteract any incentive to withhold capital inthe earlier stages.

• Theco-investmentagreement has to allow the assignment of acquired rights by co-investorsto other co-investors,or to third parties willing to enter into the co-investmentagreement subject to the transfereeundertaking being obliged to fulfil alloriginalobligations of the transferor under the co-investmentagreement.

• Co-investorshave to grant each other reciprocal rights onfairand reasonable terms and conditions toaccess the co-invested infrastructure for the purposes of providing services downstream,including toend-users,according to transparentconditions which have to be made transparentinthe co-investmentoffer and subsequentagreement,inparticular where co-investorsare individually and separatelyresponsible for the deployment of specific parts of the network.If aco-investmentvehicle is created,ithas to provide access to the network to allco-investors,whether directly or indirectly,onanequivalenceof inputs basis and according to fairand reasonable terms and conditions,including financial conditionsthat reflect the differentlevels of risk accepted by the individualco-investors.

(d)Theco-investmentoffer shall ensure asustainable investment likely to meet future needs,by deployingnew network elements that contribute significantly to the deployment of very highcapacity networks.

Backup:AnnexIVof the Commission‘s proposal for anECC(COM[2016]590final)



1.Anationalregulatory authority shall notimpose obligations as regards new network elements that are part of the relevantmarket onwhich it intends to impose or maintain obligations inaccordance with Articles 66to 72and that the operatordesignated as having significant market poweronthat relevantmarket has deployed or is planning to deploy,if it determinesthat the following cumulative conditions are met:

(a)the deployment of the new network elements is opento co-investmentoffers from any operator over the lifetime of the network,according to atransparentprocess and onterms which the nationalregulatory authority considers capable of ensuring sustainablecompetition inthe long term including inter alia fair,reasonable and nondiscriminatory terms offered to potentialco-investors;flexibility interms of the value and timing of the commitment provided by each co-investor;possibility to increase suchcommitment inthe future;reciprocal rights awarded by the co-investorsafterthe deployment of the co-invested infrastructure.Suchco-investmentsoffers shall be made public atleast6months before the marketing of end-userservices based onthe new network elements;

(b)the deployment of the new network elements contributes significantly to the deployment of very highcapacity networks;and

(c)access seekers notparticipating inthe co-investmentcan benefit from the samequality,speed,conditions and end-userreach aswasavailable before the deployment,either through commercial agreements based onfairand reasonable terms or by means ofregulated access maintained or adapted by the nationalregulatory authority;

When assessing co-investmentoffers referred to inpoint (a)of the first subparagraph,nationalregulatory authorities shallensure that those offers ataminimum comply with the criteria set outinAnnexIVand are made ingood faith.To that end,nationalregulatory authorities may inparticular:

(a)request anoffer of commitments,including changes to the co-investmentoffer,from the operator designated as having significantmarket power,that they may make binding;

(b)conduct amarket test by consulting stakeholders and interested parties,inparticular onthe offered terms.Suchconsultation shallallow potentialco-investorsto provide acounteroffer,identifying where they deem the initialoffer notto be inline with therequirements inpoint (a)or inAnnexIVand to determine whether the initialoffer is accepted by market participants.

Nationalregulatory authorities shall continuously monitor compliance with the requirements set outinthis paragraph andAnnexIVand may require the operator designated as having significant market powerto provide it with annual compliancestatements.BEREC,afterconsulting stakeholders and inclose cooperation with the Commission,shall publish guidelines tofoster the consistent application by nationalregulatory authorities of the criteria set outinthis paragraph,inAnnexIVandany additionalcriteria that may be required.

1a.Inthe absence of anoffer pursuant to paragraph 1,where anationalregulatory authority is considering to imposeobligations as regards new network elements that are part of the relevantmarket inaccordance with Articles 66to 72,itshall have regard to whether the operator designated as having significant market poweronthat relevantmarket offerscommercial access agreements to any operator over the lifetime of the new network which inthe specific circumstances arereasonably likely to result ineffectively and sustainably competitive related retail markets.Insodoing,it shall take intoaccount whether:

(a)atransparentprocess is inplace and onterms which the nationalregulatory authority considers capable of ensuring sustainablecompetition inthe long term including inter alia fair,reasonable and non-discriminatory terms offered to potentialaccess seekers;

(b)the deployment of the new network element contributes significantly to the deployment of very highcapacity networks;

(c)the offer to enter into suchcommercial access agreements is publicly available [inatimely manner atleast6months before thelaunch of end-userproducts based onsuchnew network elements;

(d)the commercial access agreement inquestion is accepted by market participants representing the majority of the market andsustainable service competition is safeguarded;and

(e)access seekers notaccepting the commercial access agreement can benefit from the samequality,speed,conditions and end-userreach as wasavailable before the deployment,either through commercial agreements based onfairand reasonable terms or by meansof regulated access maintained or adapted by the nationalregulatory authority.

Inorder to assess the commercial access agreement,the NRAshall publicly consult stakeholders and interested parties.

2.Nationalregulatory authorities shall review,afterhaving concluded their assessment pursuant to paragraphs 1and 1a,and inthe context of subsequentmarket analyses pursuant to Article 65,which obligations may be imposed inaccordancewith Articles 66to 72,where they conclude that,absenttheir intervention,effective competition inone or more retailmarkets would notbe achieved by the continued application of the conditions set outinparagraph 1and of the criteria setoutinAnnexIV.

2a.MemberStatesmay specify aminimum duration notlonger than 7years during which the NRAshall notimposeobligations afterthe assessment referred to inparagraph 2.

3.By way of anexception to paragraph 1,MemberStatesmay decide that anationalregulatory authority may,indulyjustified circumstances,impose,maintain or adapt remedies inaccordance with Articles 66and Articles 67to 72obligationsas regards new network elements referred to under paragraph 1inorder to address significant competition problems onspecific markets,where the nationalregulatory authority establishes that given the specific characteristics of these markets,these competition problems could notbe addressed by the application of the requirements set outinparagraph 1and inAnnexIV,or by the existence of viable and similar means of access,including offers proposed onacommercial basis.Beforeadopting adecision pursuant to this paragraph,the nationalregulatory authority shall submit arequest to the Commission.TheCommission,taking utmost account of the opinion of BERECand acting inaccordance with the procedure referred to inArticle 110(3),shall take adecision within three months of the request,authorising or preventing the nationalregulatoryauthority from taking suchmeasures.

4.Inthe event of adispute arising inconnection with co-investmentor commercial access agreements,the nationalregulatory authority concerned shall,atthe request of either party,provide dispute resolution inaccordance with Article26(1).

Backup:Art.74of the Council‘s position for anECC(12797/1/17REV1)



When assessing aco-investmentoffer pursuant to Article 74(1),the nationalregulatory authority shall verifywhether the following criteria have ataminimum been met.Nationalregulatory authorities may consideradditionalcriteria to the extent they are necessary to ensure accessibility of potentialinvestors of the co-investment,inlightof specific local conditions and market structure:

(a)Theco-investmentoffer shall be opento any undertaking over the lifetime of the network built under aco-investmentoffer onanon-discriminatory basis.TheSMPoperator may include inthe offer reasonableconditions regarding the financial capacity of any undertaking,sothat for instance potentialco-investorsneedto demonstrate their ability to deliver phased payments onthe basis of which the deployment is planned,theacceptance of astrategic planonthe basis of which medium-termdeployment plans are prepared,etc.

(b)Theco-investmentoffer shall be transparent:

• the offer is available and easily identified onthe website of the SMPoperator;



(c)Theco-investmentoffer shall include terms to potentialco-investorswhich favour sustainable competitioninthe long term,inparticular:

• Allundertakings have to be offered fair,reasonable and non-discriminatory terms and conditions forparticipation inthe co-investmentagreement relativeto the timethey join,including interms of financialconsideration required for the acquisition of specific rights,interms of the protection awarded to the co-investorsby those rights both during the building phase and during the exploitation phase,for exampleby granting indefeasible rights of use (IRUs)for the expected lifetime of the co-invested network and interms of the conditions for joining and potentially terminating the co-investmentagreement.Non-discriminatory terms inthis context donotentail that allpotentialco-investorsmustbe offered exactlythe sameterms,including financial terms,butthat allvariations of the terms offered mustbe justified on

the basis of the sameobjective,transparent,non-discriminatory and predictable criteria suchas thenumber of enduser lines committed for.

• Theoffer mustallow flexibility interms of the value and timing of the commitment provided by each co-investor,for example by means of anagreed and potentially increasing percentage of the totalenduserlines inagiven area,to which co-investorshave the possibility to commit gradually and which shall be setataunit level enabling smaller co-investorswith limitedresources to enter the co-investmentatareasonably minimum scale and to gradually increase their participation while ensuring adequate levels ofinitialcommitment.Thedetermination of the financial consideration to be provided by each co-investorneeds to reflect the fact that early investors accept greater risks and engage capital sooner.




(d)Theco-investmentoffer shall ensure asustainable investment likely to meet future needs,by deployingnew network elements that contribute significantly to the deployment of very highcapacity networks.

Backup:AnnexIVof the Council‘s position for anECC(12797/1/17REV1)



1.Without prejudice to the assessment by nationalregulatory authorities of co-investmentinother types of networks,anationalregulatoryauthority may determine notto impose obligations as regards new very highcapacity networks which,if fixed,extend to the premises or,ifmobile,to the base station,that are part of the relevantmarket onwhich it intends to impose or maintain obligations inaccordance with Articles70,71and 72and that arelevantoperator has deployed or is planning to deploy,if it concludes that the following cumulative conditions are met:

(a)the deployment of the new network elements is opento co-investmentatany point during their lifetime by any operator according toatransparentprocess and onterms which ensure sustainable competition inthe long term including inter alia fair,reasonable and non-discriminatory terms offered to potentialco-investors;flexibility interms of the value and timing of the commitment provided by each co-investor;possibility to increase suchcommitment inthe future;reciprocal rights awarded by the co-investorsafterthe deployment of theco-invested infrastructure;

(aa)atleastone co-investmentagreement based onanoffer made pursuant to (a)has been concluded and the co-investorsare or intendto be service providers,or to hostsuchproviders,inthe relevantretail market and have areasonable prospect of competing effectively;

(c)access seekers notparticipating inthe co-investmentcan benefit from fair,reasonable and non-discriminatory access conditions,takingappropriate account of the risk incurred by the co-investorseither through commercial agreements based onfairand reasonable terms orby means of regulated access maintained or adapted by the nationalregulatory authority;

Nationalregulatory authorities shall determine whether the conditions above are met,including by consulting with relevantmarket participantsinaccordance with the provisions of Article 65(1)and (2).

When assessing co-investmentoffers,processes and agreements referred to inthe first subparagraph,nationalregulatory authorities shallensure that those offers,processes and agreements comply with the criteria set outinAnnexIV.

2.Paragraph1is without prejudice to the powerof anationalregulatory authority to take decisions pursuant to the first paragraph of Article 26inthe event of adispute arising between undertakings inconnection with aco-investmentagreement deemed by it to comply with theconditions set outinthat paragraph and with the criteria set outinAnnexIV.

Backup:Art.74of the Committee report for anECC(A8-0318/2017)



When assessing aco-investmentpursuant to Article 74(1)(d),the nationalregulatory authority shall verifywhether the following criteria have been met:

(a)Theco-investmentshall be opento any undertaking over the lifetime of the network built under aco-investmentoffer onanon-discriminatory basis.TheSMPoperator may stipulate reasonable conditionsregarding the financial capacity of any undertaking,sothat for instance potentialco-investorsneed todemonstrate their ability to deliver phased payments onthe basis of which the deployment is planned,theacceptance of astrategic planonthe basis of which medium-termdeployment plans are prepared,etc.

(b)Theco-investmentshall be transparent:

• terms and conditions mustbe available and easily identified onthe website of the SMPoperator;



(c)Theco-investmentshall include terms to potentialco-investorswhich favour sustainable competition inthe long term,inparticular:

• Allundertakings have to be offered fair,reasonable and non-discriminatory terms and conditions forparticipation inthe co-investmentagreement relativeto the timethey join,including interms of financialconsideration required for the acquisition of specific rights,interms of the protection awarded to the co-investorsby those rights both during the building phase and during the exploitation phase,for exampleby granting indefeasible rights of use (IRUs)for the expected lifetime of the co-invested network and interms of the conditions for joining and potentially terminating the co-investmentagreement.Non-discriminatory terms inthis context donotentail that allpotentialco-investorsmustbe offered exactlythe sameterms,including financial terms,butthat allvariations of the terms offered mustbe justified onthe basis of the sameobjective,transparent,non-discriminatory and predictable criteria suchas thenumber of enduser lines committed for.

• It mustallow flexibility interms of the value and timing of the commitment provided by each co-investor,for example by means of anagreed and potentially increasing percentage of the totalenduser lines inagiven area,to which co-investorshave the possibility to commit gradually and which shall be set ataunitlevel enabling smaller co-investorsto gradually increase their participation while ensuring adequatelevels of initialcommitment.Thedetermination of the financial consideration to be provided by each co-investorneeds to reflect the fact that early investors accept greater risks and engage capital sooner.




(d)Theco-investmentshall ensure asustainable investment likely to meet future needs,by deploying newnetwork elements that contribute significantly to the deployment of very highcapacity networks.

Backup:AnnexIVof the Committee report for anECC(A8-0318/2017)

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