The EC is considering rolling back regulation on the sector, particularly ex-ante rules that often apply to former incumbent operators. We consider whether this deregulatory push is part of a wider global trend.
The EC’s proposed deregulatory agenda will influence future legislation in the EU, as well as the bloc’s regulatory regime for telecoms. Its vision for the sector (including the transition away from ex-ante rules) is reflected in the Gigabit Recommendation and the Digital Infrastructure White Paper, and broadly supported by the high-profile Letta and Draghi reports.
Regulators in some EU Member States appear more cautious towards rolling back regulation. In Ireland, the EC considered ComReg’s approach to lifting access regulation overly conservative, while in Malta, the MCA proposed to impose wholesale remedies on the incumbent’s broadband network – a move ultimately vetoed by the EC.
Elsewhere the picture is more mixed. The ACCC in Australia has deregulated some copper-based access products, while the MIC in Japan is introducing new rules to improve competition and consumer protection in mobile. As some countries in Latin America borrow from Europe’s playbook, Mexico is taking regulatory reform to the extreme.
A new consumer-oriented policy direction in Canada has seen the CRTC move to boost competition in fixed and mobile, mandating MVNO access and opening up fibre networks. In the US, the FCC has voted to restore its oversight of the sector, but resistance from operators and political uncertainty mean things could change.
The retirement of legacy networks may be a trigger for regulation to evolve, with Ofcom in the UK identifying the upcoming copper switch-off as something that may influence rules for the next five years. While copper retirement might mean a lighter regulatory burden for the incumbent, in Norway, it has seen SMP extended to eight additional fibre providers.
The EC’s proposed deregulatory agenda will influence future legislation and a review of the EU’s overarching regulatory regime for telecom
Regulation of the telecoms sector – particularly at the wholesale level – has enabled competition that has driven positive outcomes for consumers. Regulation has also promoted investment in infrastructure, with duct and pole access facilitating fibre deployments by alternative operators to the incumbent. As markets have matured and evolved, some regulators have sought to remove rules where they are no longer needed. For over 20 years, the EC’s Recommendation on Relevant Markets has guided regulators across the EU and acted as a central pillar of SMP regulation of the sector. Over time, markets have been removed from the Recommendation as they were found to be competitive, and the associated regulatory burdens subsequently lifted.
Mobile call termination is one such market, with regulators in some countries (such as Belgium, Denmark and Ireland) now relying on the ‘three criteria test’ to determine the need for intervention and subsequently repealing obligations previously imposed. In addition, the latest reviews of wholesale broadband access have led to deregulation in certain geographic sub-markets, with Italy and Portugal offering two examples. This approach has been endorsed by the EC as it seeks to incentivise copper retirement as well as the widespread rollout of gigabit-capable networks. In February 2024, the EC adopted the Gigabit Recommendation, which includes provisions (e.g. on pricing flexibility for very high capacity networks (VHCNs) and on shortening copper decommissioning timelines) intended to accelerate the bloc’s transition to fibre – see Table 1. The same month, the EC published the Digital Infrastructure White Paper that foresees a potential scenario where there are no markets susceptible to ex-ante regulation, or where only civil infrastructure is presumed to be (as it is “the most persistent bottleneck”).
While the prospect of a shift to ex-post oversight of telecoms has received a fair degree of criticism from stakeholders, the EC’s thinking – for instance, on the industry’s poor financial health and the need to adjust regulation and complete the digital single market – has been broadly endorsed by high-profile reports from two former Italian prime ministers, Enrico Letta and Mario Draghi. The deregulatory agenda the EC appears eager to pursue will likely be heavily reflected in a future Digital Networks Act, which is expected to then influence the upcoming review of the European Electronic Communications Code (EECC). As regulation on former incumbent operators falls away, such reforms could see the scope and objectives of the EECC applied more broadly to large tech firms, with the White Paper proposing to consider how to level the playing field between telecoms and cloud as the infrastructures converge.
The EC has criticised the proposed regulation of wholesale broadband access in some Member States
Despite the EC’s best efforts, regulators in some EU Member States appear keen to take a more cautious approach to rolling back regulation on the telecoms industry. For instance, a number of EU countries continue to regulate markets no longer considered uncompetitive (e.g. call access and origination, trunk segments of leased lines), while a couple – in addition to the UK – still expect providers to run and maintain a network of public payphones. As such, there currently exists a high degree of variation both from an EU perspective and when viewed from a global standpoint, with countries not necessarily moving in lockstep towards a deregulatory end point – see Figure 1.
Following some recent market review notifications, the EC has been critical of national regulators’ analysis and/or draft decisions. In ComReg’s latest review of the wholesale local access market, the EC considered the Irish regulator’s coverage thresholds for lifting access regulation to be “overly conservative”. It also stated ComReg appeared to underestimate criteria other than coverage (e.g. intensity of retail competition, wholesale access provided by competitors and regulation in the upstream physical infrastructure access market) when assessing the competitive conditions in a given area. Malta provides another relevant example, with the EC going a step further by rejecting the latest proposed regulation of the wholesale broadband market. In its review that was originally notified to the EC in December 2023, the Malta Communications Authority (MCA) identified GO, the incumbent, as having SMP and intended to impose access remedies exclusively on GO’s network. However, the EC determined that the MCA should have taken into account the competitive constraints imposed by alternative physical infrastructures. BEREC subsequently issued an opinion that disagreed with the EC’s findings. BEREC sided with MCA, stating that the retail market would not be effectively competitive absent regulation. Despite that opinion, the EC’s veto (of April 2024) stands, requiring the MCA to lodge an appeal with the EU’s General Court or revisit its analysis and renotify the market review. With the latter expected, this could set an interesting precedent for the region, as well as have implications for the continued rollout of fibre in Malta.
As countries in Latin America borrow from Europe, Mexico’s regulatory overhaul should not be expected to be widely replicated
Across some countries in Latin America, recent regulatory initiatives reflect, if not draw inspiration from, decisions made in Europe:
In April 2024, Argentina’s Government removed caps on fixed and mobile services, aligning with the situation in Europe where retail prices are typically not regulated – except in specific cases, e.g. to limit inflation-linked price increases. The Government is also undertaking a review of the Ente Nacional de Comunicaciones (ENACOM), considering that the regulator could be doing more to deregulate the sector and support the expansion of connectivity across the country;
In Chile, the regulator Subtel will reportedly submit a proposal to the country’s Senate to modernise the telecoms regulatory framework, including by streamlining and reducing red tape around permitting processes to accelerate network rollouts. This would follow the Gigabit Infrastructure Act (GIA) in the EU, whose primary aim is to reduce the cost of, and barriers, to VHCN deployment; and
In August 2024, Peru’s Government adopted a decree that could see C-band spectrum directly allocated to operators at no cost in exchange for commitments to expand 5G coverage to rural areas and places of public interest. It seems Peru is set to mirror the approach taken in New Zealand while reflecting measures to extend spectrum licences in Germany and Spain that either seek to support or require investment in mobile networks.
At the same time, Mexico is providing an extreme version of the kind of regulatory overhaul the EC has in mind, which is unlikely to be implemented elsewhere. Following a proposal in February 2024, in October, the Government confirmed a package of constitutional reforms that would dissolve the Instituto Federal de Telecomunicaciones (IFT), the telecoms regulator, along with the country’s competition authority and a number of other federal regulators. The work of the IFT is expected to be returned to the Secretariat of Infrastructure, Communications and Transportation (SICT), which acted as the regulator for telecoms prior to the formation of the IFT in 2013. Since that time, the market has made real progress in terms of competition and growth, with the independent regulator playing a central role in enforcing an ex-ante regime that spans both fixed and mobile. The IFT’s dissolution would also complicate Mexico’s trilateral trade agreement with the US and Canada, as the US-Mexico-Canada Agreement (USMCA) requires that Mexico maintain an independent telecoms regulator.
Regulators in Australia and New Zealand have considered deregulation, while those in Japan and South Korea have introduced new rules
Potential deregulation in the EU is being reflected in parts of the Asia Pacific region, where some regulators have looked at modernising rules governing telecoms in light of market and technological developments. In March 2024, the Australian Competition and Consumer Commission (ACCC) concluded its inquiry into whether nine wholesale telecoms services should continue to be regulated, or “declared”. The ACCC examined how factors such as the completion of the National Broadband Network (NBN) and declining use of Telstra’s copper network have changed how telecoms services are accessed and used. With take-up of the currently unconditioned local loop and line sharing service fast approaching zero, the ACCC allowed declarations for these two legacy network access products to expire on 30 June.
In New Zealand, the Commerce Commission has considered a possible deregulation of fibre networks (initially in certain geographic areas), which have been deployed by four regulated wholesale providers. By the end of this year, the Commission must make a final decision on whether there are reasonable grounds to begin a fibre fixed line access service (FFLAS) deregulation review, and it has sought stakeholders’ views on changes in competitive conditions over the past few years, including the increasing use of fixed wireless access (FWA) services and proposals from Chorus to withdraw copper in some parts of the country. The regulator’s provisional position is that it would be too early to deregulate fibre from 2025, although it has opened the door to relaxing the rules from 2029 should developments (for example, the increased rollout and adoption of 5G FWA) permit it to do so.
Meanwhile, in Japan, the Parliament has moved to ease restrictions on the former incumbent NTT that are grounded in a nearly 40-year-old piece of legislation. The current Government wants to propose to abolish the ‘NTT Law’ altogether in 2025, arguing it is outdated and no longer reflects the business environment in which NTT faces intense competition in fixed and mobile services. Though this move may at first appear to resemble efforts elsewhere to deregulate the sector (that have been alleged as favouring large operators over challengers), the Ministry of Internal Affairs and Communications (MIC) has also announced a plan to drive competition in the country’s mobile market. The regulator considers that ensuring that mobile services are of high quality and offered at reasonable prices will contribute to enhancing overall quality of life, and will have a particular focus on improving affordability and switching, and tackling excessive handset discounts.
The MIC’s planned initiatives are similar to actions taken in South Korea, where operators have faced pressure from the Ministry of Science and ICT (MSIT) to improve rural 5G coverage, introduce mobile tariffs that are cheaper and more closely aligned with average data usage, reduce early termination fees for broadband services and provide wholesale access for MVNOs. The MSIT has also looked to support the entry of a new fourth mobile operator by (re)awarding 28GHz spectrum to Stage X – a consortium that includes Stage Five (a communications affiliate of domestic tech giant Kakao). However, Stage X’s licence has since been revoked over concerns related to management and funding, bringing the regulator back to square one.
Operators have responded to the introduction of wholesale access regulation by cutting capex and scaling back build plans
Canada too has brought pricing and consumer protection into sharper focus in recent years, with operators seeing an increased regulatory burden. In May 2022, Government department Innovation, Science and Economic Development Canada (ISED) proposed a new policy direction for the telecoms sector, requiring the regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), to put in place measures to drive competition and support end users – particularly with respect to prices, which are relatively high compared to many other advanced economies. In October of that year, the CRTC approved – for the first time – conditions for wholesale access for MVNOs, requiring national operators Bell, Rogers and Telus and regional provider SaskTel to open up their networks, entering into negotiations with access seekers on regulated terms. The move aims to drive competition and choice in the mobile market by lowering entry barriers for new providers.
In November 2023, the CRTC issued a temporary decision requiring fixed operators Bell and Telus to provide aggregated access to their fibre networks in Ontario and Quebec – again for the first time. While the decision may align with ISED’s ambition for a wholesale broadband regime that is “sustainable, effective and fair”, Bell responded by cutting at least C$1bn (£565m) in capex for 2024-2025, equivalent to a reduction in build targets by around 700,000 locations. The new consumer-oriented policy direction therefore represents a challenging programme of work for the CRTC given the responsibility to strike a balance between incentivising investment and innovation and promoting competition and affordability. However, smaller, regional ISPs and virtual providers may still be cautiously optimistic about the regulator’s interventions. In August 2024, the CRTC built on its temporary decision, requiring that Bell, SaskTel and Telus provide competitors with workable wholesale access to their fibre networks throughout the whole of Canada. It also appears the Government remains committed to this agenda, announcing in the 2024 Budget an intention to amend legislation to introduce new consumer protection measures relating to contracts and switching.
In contrast to the EU, developments in the US may result in an increased regulatory oversight of telecoms, complementing recent high-profile measures, including the mandating of broadband nutrition labels, the approval of rules to prevent and eliminate digital discrimination, and a notice of inquiry into data caps for fixed and mobile tariffs. During the Biden administration, the Federal Communications Commission (FCC) has faced calls to restore net neutrality rules that were repealed in 2018. Some policymakers have written to the FCC or even introduced bills proposing to reclassify broadband internet access as a telecoms service under Title II of the Communications Act – rather than an information service under Title I. Following a proposal from Jessica Rosenworcel (Chairwoman, FCC), on 25 April 2024, the regulator’s five Commissioners voted 3-2 in favour of reclassification, thereby giving the FCC the power once again to regulate operators as ‘common carriers’. However, on 1 August, an appeals court stopped the reinstatement of the rules (extending an earlier temporary pause), stating industry would likely succeed on the merits of a legal challenge. The FCC has called the decision “a setback”, although it will face resistance from ISPs to reclassification, while a change of administration (specifically from Democrat to Republican after the forthcoming presidential election) could always undo the rules in future.
The retirement of legacy networks provides an opportunity to reconsider the regulatory landscape
In the UK, after a period of newly introduced consumer protection measures, Ofcom’s focus will predominantly be on monitoring effectiveness rather than implementing any significant new regulation. It also seems set to preserve the status quo rather than seek to effect a deregulatory overhaul through the ongoing Telecoms Access Review (TAR). The TAR, one of Ofcom’s major pieces of work for 2024/2025, aims to ensure the UK’s digital infrastructure is fit for the future by creating the conditions for sustainable network competition and investment in gigabit-capable broadband over the 2026-2031 period. In 2021, Ofcom’s Wholesale Fixed Telecoms Market Review (WFTMR) outlined a 10-year plan to deliver on these objectives and it is unlikely to divert from its current path at the halfway mark. Nevertheless, Lindsey Fussell (Group Director, Networks and Communications, Ofcom) has said that she recognises that aspects of the TAR will be contentious and that there may be some changes in the market – for example, the copper switch-off – that could mean considering how regulation should evolve.
Norway provides an interesting illustration of how decommissioning of legacy networks can lead (perhaps unintentionally) to a widening of the regulatory net. The shutdown of Telenor’s copper network has led to variations in the competitive situation in different parts of the country. Telenor used to be solely dominant in wholesale broadband and subject to access obligations, but the regulator’s latest analysis identifies 22 regional markets. Across 12 of these, nine fibre providers – Telenor included – are considered to have “too much power”, resulting in little competition for customers, higher prices and lower quality of service. Nkom has therefore proposed these SMP operators open up their networks to rivals on fair and reasonable terms.
While Norway is a leader in the copper switch-off process, there may be other European countries where the presence of a number of scaled fibre providers prompts the regulator to consider multiple SMP designations in an upcoming market review – or equally to find the market to be competitive and to decide not to impose remedies on the dominant operator(s). Amid a broad push to lighten the regulatory burden on operators, regulators – especially those in the EU that must take utmost account of EC guidance – should have the flexibility to regulate in line with national circumstances, enabling them to make appropriate and proportionate interventions to promote competition and investment, and deliver the right outcomes for end users.
