For the first time, BNetzA’s wholesale charge controls for PIA will take into account Deutsche Telekom’s investment in the rollout of full fibre
BNetzA scales back Deutsche Telekom’s proposed pricing for PIA products
On 10 April 2024, in Germany, BNetzA published its draft decision on Deutsche Telekom’s proposed pricing for wholesale access to its duct and pole network. BNetzA imposed price control obligations on Deutsche Telekom after designating it with significant market power (SMP) in the physical infrastructure access (PIA) market in its latest fixed market review, which was completed in July 2022. The regulator also required Deutsche Telekom to submit a reference offer for assessment, on which a decision is still expected, and to make regular updates to data on duct capacity in the national Infrastructure Atlas. BNetzA’s decision is subject to a public consultation period that will conclude on 10 May 2024 and a subsequent review by the EC. The regulator states that, given some uncertainty in how the take-up of access products will develop, it expects its decision will only remain valid for a two-year period.
The regulator concludes that markups for the potential loss of customers is only appropriate in relation to full fibre connections
In both its fixed market review and the draft pricing decision, BNetzA noted that this is the first time that a price assessment has had to consider potential impacts on the former incumbent’s business plan, specifically in the context of incentives for ongoing investments in fibre. Generally, the regulator intends to approve lower access prices than Deutsche Telekom proposed, in some cases significantly so. BNetzA noted that Deutsche Telekom included the potential fall in revenue expected from the loss of customers to competitors in addition to costs incurred. The decision determines that a markup for a potential loss of customers is only appropriate where Deutsche Telekom is actively making fibre investments, such as in relation to completing full fibre connections from street cabinets to homes – somewhere the incumbent is only beginning deployments. However, BNetzA finds that Deutsche Telekom has largely completed connections linking exchanges to street cabinets during its deployment of vectoring. Therefore, investments in those connections are already accounted for in the weighted average cost of capital (WACC, which is used to determine charge controls) and the further inclusion of a potential loss of customers is inappropriate.
The PIA market will remain a central example of balancing network investment incentives against competition across Europe
Given continued findings of SMP in the PIA market, regulators elsewhere in Europe are also facing the challenge in balancing network investment incentives against the need to support competition. According to our Fixed Telecoms Tracker, Portugal’s regulator ANACOM cited similar pressures to BNetzA in its 2023 market review. Here, ANACOM took the additional step of referring the price control obligations placed on incumbent MEO in the PIA market for further public consideration. The regulator outlined six options for pricing methodologies and implementing the obligation, which will be included in a consultation sometime this year. Referred to as the “most persistent bottleneck” in the EC’s recent digital networks white paper, the civil infrastructure market was singled out as a potential area warranting continued ex-ante regulation despite the EC otherwise setting out a broad deregulatory agenda.
