The European Commission's eCommunications Consultation Task Force has today published a letter (dated 18 May 2004) relating to a notification made by the Irish regulatory authority ComReg.
Document SG-greffe (2004) D/202127 concerns Market 11: wholesale unbundled access (including shared access) to metallic loops and sub−loops for the purpose of providing broadband and voice services.
As we have reported earlier (news item of 19 April 2004), ComReg defined the market as a national market, and concluded that Eircom, the fixed incumbent operator, has SMP, and put forward the widest range of regulatory remedies, including cost-orientation according to the FL-LRIC methodology for fully unbundled loops and for shared access.
The eCCTF letter essentially endorses ComReg's approach, including the market definition, the SMP designation, and the selection of regulatory remedies, but the European Commission makes a rather remarkable commentary about the choice of cost-accounting methodology, in relation with pricing and utilisation of local loop unbundling in Ireland. Clearly, the European Commission is once again taking the opportunity of an ECCTF letter to give a policy signal, not only to Ireland, but also to other Member States.
The eCCTF letter's key element is reproduced in full below:
"Rather than imposing cost-orientation on the basis of fully distributed historic costs (“FDHC”) as is currently the case, ComReg intends to apply a forward-looking long run incremental cost (“FL-LRIC”) methodology for implementing the proposed price control requirement. ComReg believes that a carefully implemented application of FL-LRIC with regard to the access network should give the correct signals to the market players and should support the introduction of competition with regard to services which make use of the local loop. In ComReg’s view, this methodology would satisfactorily remedy the competition failure of inappropriate and possibly excessive pricing, resulting from the absence of competition in the notified relevant market. This would in turn support the rise in the number of full unbundled and shared access lines in Ireland and better achieve the policy objectives of Article 8 of the Framework Directive.
In view of the relatively high prices and low penetration rate of LLU in Ireland, the Commission invites ComReg to monitor market developments carefully, and especially (i) how the implementation of the proposed costing methodologies would be more effective at addressing the lack of effective competition in the provision of fully unbundled lines, shared lines, collocation and associated facilities, than the current obligation and (ii) how and to what extent these would positively impact on the level of prices and the numbers of fully unbundled and shared access lines in Ireland. The Commission notes in this respect that ComReg is currently in a consultation process with a view to decide on how in detail the costs for fully unbundled and shared lines, collocation and associated facilities should be allocated."
The full text of Document SG-greffe(2004) D/202127 can be accessed by clicking here, and has been added to the T-REGS document section compiling and categorising eCCTF letters (.zip archives containing descriptive filenames).