The European Commission's eCommunications Consultation Task Force (eCCTF) has published another letter (dated 25 Aug 2004) relating to Market 12: "wholesale broadband access", and it again focuses specifically on the treatment of cable TV networks.
This letter refers to a notification made by the Irish regulatory authority ComReg, and closely follows the line set out in a recent letter (dated 20 Aug 2004) addressed to the Swedish regulatory authority PTS (see also the relevant T-REGS news item).
As reported in detail in an earlier T-REGS news item covering ComReg's draft market analysis on "wholesale broadband access", ComReg had provisionally concluded that the relevant market should include the provision of bitstream services to third parties, as well self-supply by the fixed incumbent operator Eircom, and the self-supply by cable operators and by fixed wireless access operators.
The eCCTF formulates substantive comments on the inclusion of self-supply by the cable and fixed wireless access operators, and, whilst it does not ask ComReg to change its market definition, it does express doubts as to whether, in the Irish context, cable and fixed wireless access should, at this time, be included in the market definition.
We reproduce the key part of the eCCTF letter in full hereafter.
The eCCTF letter contains the following statement:
The inclusion of self-supply by cable operators and FWA operators in the relevant product market: In its notification, ComReg considers that the indirect pricing constraint exercised by cable- and FWA-based services at the retail level has a sufficiently significant impact at the wholesale level to justify its inclusion in the WBA market, despite the fact that a direct competitive check by wholesale cable and FWA operators on ADSL bitstream providers in the WBA market is unlikely within the timeframe of the review. In adopting such an approach to market definition, ComReg does not focus on demand side and supply side substitutability between PSTN-based and cable- or FWA-based wholesale inputs.
The Commission recognises that ComReg’s approach to defining a wholesale market on the basis of the competitive conditions in the corresponding retail market is not in principle inconsistent with the methodology set out in the Recommendation and in the Commission’s Guidelines on market analysis and the assessment of significant market power. However, the Commission draws ComReg’s attention to the definition of wholesale broadband access in the Annex to the Recommendation on relevant markets, which covers both (PSTN) bitstream access and “wholesale access provided over other infrastructures, if and when they offer facilities equivalent to bitstream access.”
For the definition of the relevant market, demand side substitution represents the most immediate and effective disciplinary force on the suppliers of a given product, in particular in relation to their pricing decisions. Basically, the exercise of market definition consists in identifying the effective alternative sources of supply for the customers of the undertakings involved. ComReg explicitly excludes any potential direct constraint exercised by providers of cable- or FWA-based wholesale inputs and bases its conclusions entirely on an assumed indirect pricing constraint derived from substitutability at the retail level. The Commission considers that in the presence of evidence excluding demand side substitutability at the wholesale level, such an indirect competitive constraint could have been taken into account subsequent to the definition of the relevant market, i.e. at the stage of assessment of SMP.
Moreover, in the case of FWA platforms, the limited capacity – as identified by ComReg – carried on these networks may even call into question the existence of an indirect pricing constraint, as one of the assumptions of the “indirect pricing constraint” approach is the ability of providers to increase output in case of a retail price increase by the competing network operator.
Notwithstanding, while this approach may have led to a narrower market definition and there remain doubts as to whether cable- and FWA-based wholesale bitstream access products (whether currently or prospectively) form part of the market, the exclusion of cable- and FWA-based wholesale services from the market definition in this particular case would not have led to a different result in the SMP analysis.
Consequently, the Commission considers that a conclusion on the exact scope of the market is not relevant in the present case for the purposes of SMP assessment. [...]"
T-REGS Note: The European Regulators Group (ERG) announced in June 2004 that it intends to expand its ERG Common Position on bitstream access with a new section on wholesale broadband access to CATV networks, and that a public consultation would be held on this topic.