Alignment with the EECC is paramount, with the current version risking premature deregulation and a higher administrative burden for NRAs
Wording of the Recommendation is not fully aligned with the EECC: In early May 2023, BEREC published its opinion on the draft Gigabit Recommendation, which the EC unveiled in February of this year. The measure focuses on providing guidance to national regulators on governing access to the networks of operators with significant market power (SMP) and would replace the two current Access Recommendations. While recognising the EC’s work in promoting gigabit connectivity, BEREC considers that the Recommendation should pay equal attention to other objectives of Article 3 of the EECC (i.e. the promotion of sustainable competition, the development of the internal market and the protection of end users). It is also a major concern for BEREC that some wording used by the EC is not fully aligned with the Code and may go beyond it, risking the “delicate balance” achieved by the 2018 regulation. In BEREC’s view, the “highly detailed” provisions of the Recommendation could therefore limit the discretion given to NRAs under the Code, while increasing the administrative burden on them.
The EC is risking premature deregulation: A key proposal in the Recommendation is the suggestion that NRAs consider pricing flexibility for SMP operators’ wholesale products. Though the draft is based on a similar logic to the existing Access Recommendations, it significantly widens the situations where NRAs should refrain from imposing a price control obligation on access to very high capacity networks (VHCNs). For BEREC, this development raises two questions: consistency between the Recommendation and the Code; and the justification for pricing flexibility in the situations the EC has identified. Generally, BEREC is concerned that the Recommendation ‘lowers the bar’ for an effective retail price constraint to an extent that risks premature deregulation. In particular, it is concerned that the EC proposes to consider not imposing regulated wholesale access prices on VHCNs when infrastructure competition is only “emerging”, “prospective” or at any other low level of “likelihood” or “viability”, adding that future rollouts should not be the sole basis for determining pricing flexibility in certain geographic areas.
No indication that the EC will issue a public consultation: BEREC has also offered comments on how to adequately reward the risk associated with investments in digital infrastructure. To that end, it urges the EC to clearly separate two issues. Firstly, dealing with the temporary increase of inflation when calculating the weighted average cost of capital (WACC), which can reflect current macroeconomic parameters but should not depart from the predictability and consistency principles of the EECC. Secondly, estimating a VHCN risk premium for new investment projects, where the Recommendation should (among other things) factor in the principle of stability over a market review period. More broadly, BEREC wants the Recommendation to foresee an appropriate transitional period before its complete application, thereby affording NRAs sufficient time to adjust their regulatory frameworks accordingly. The EC is currently considering BEREC’s opinion as it moves to adopt a final Recommendation. Despite claims from ECTA (the European Competitive Telecommunications Association) that the draft is unnecessary and legally flawed, there are no signs as yet that the EC will issue a public consultation, having already sought stakeholder opinion via a targeted consultation and a workshop in 2020 and 2021, respectively.
