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Regulating access markets (4 and 5)

Regulating access markets (4 and 5). Marek Piiroja 30 .08.2013. Current situation on markets 4 and 5. In principle a t the moment in Estonia the fibre access ( including prices ) is not regulated and by the SMP decision on 2009 the Elion is just obliged :

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Regulating access markets (4 and 5)

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  1. Regulating access markets (4 and 5) Marek Piiroja 30.08.2013

  2. Current situation on markets 4 and 5 • In principle at the moment in Estonia the fibre access (including prices) is not regulatedand by the SMP decision on 2009 the Elion is just obliged: • toinform other communications providers that use Elion's copper-based local loops at least 6 months in advance of any change to fiber-optic cable loops and services based on fibre.

  3. Market analysis 2013 • In 2013 ECA has conducted on M 4 and M 5new analysis. • ECA included in the markets the provision of local loops and sub-loops (including full and shared access) over copper and fibre. • In both markets, ECA has proposed to use a top down historical cost – fully distributed cost („TD HC FDC“) methodology for the calculation of prices for copper access, fibre acces as well as broadband acces.

  4. Market analysis 2013 • ECA found that the use of a simple TD HC FDC methodology is sufficient to avoid excessive prices and price discrimination. This methodology has been used since 2007, with decreasing wholesale copper pair access price as a result. • Also, using this cost methodology will allow to cover the investments made and still make a profit.

  5. The term of performance of the imposed obligations (fibre) on markets 4 and 5 • Elion´s proposal - 22 months. The final measure proposed: • M 4 - Access obligations related to free fibre-optic feeder segment fibers and shared access to free fibre-optic feeder segment capacities will have to be met in six (6) and nine (9) months, respectively, from the moment of entry into force and deliveryof the decision. • M 5- the obligations concerning broadband access based on optical cable enter into force 9 (nine) months after the entry into force and delivery of the decision.

  6. Benchmarking. BU LRIC CC model. • Telephoneconversation with the EK. Benchmarking. • No suitable countries for benchmarking base. • Other EU countries LRIC CC prices are considerably higher than Estonia prices today. • The impacts of the BU LRIC CC model for Estonia markets: • Increasing copper access prices, which will cause: • margin squeeze; • damage end-users ability to get qualitative broadband services.

  7. The impacts of the BU LRIC CC model for Estonia markets • Alternative operators loose interest to rent wholesale copper lines, which will close LLU service at all. • Very burdensome remedies to SMP’s operator and regulator in consideration of market volumes. • The SMP operator might decrease investments.

  8. Main conclusion of EK decision • On May 2013 Commission expressed serious doubts the proposed choice of costing methodologycomplies with the policy objectives and regulatory principles, in particular Article 8 of the Framework Directive. • The Commission considers that the use of historic costs for the valuation of all assets, can potentially lead to very low access prices.

  9. BEREC opinion • The decisions on the type of costing methodology to implement depends largely on national circumstances. • BEREC does not support the Commission´s view that the Estonian price level has negative effects on investments by alternative operators. • The fact that SMP operator support present cost methodology, may be part of ECA´s motivation for using this methodology.

  10. BEREC opinion • BEREC notes that the Commission has previously approved without comments the use of TD HD FDC in Estonia, and the methodology has been in use already since 2007 in the wholesale copper pair-access market. • BEREC point out that according to point 25 of the NGA-recommendation, in force since 2010, the price of access to the unbundled fibre loop should be cost oriented.

  11. BEREC opinion • BEREC finds it odd that the Commission´s statement differs from the NGA-recommendation, and instead relies on the draft Commission recommendation on non-discrimination and costing methodologies, which was not formally adopted by the Commission at the time of ECA´s notification. • BEREC recommends that the ECA adds to its SMP-decision a more thorough justification / evidence as to why, a TD HC FDC based costing methodology is to be preferred. • BEREC does not take a positionwhether or not using a TD HC FDC approach is the most appropriate in the given case.

  12. Meeting with the European Commission • The meeting between representatives of the Commission, BEREC and ECA was held in Tallinn on 27 August. • The Commission found that we should withdraw the draft decision or change current HC FDC cost methodology to CC FDC. • We need to inform the Commission no later than 13 September of our decision.

  13. . Thank you !

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