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Analysis draft on the Telecom Package

This draft has been written for a meeting initiated by the ARCEP (French regulatory authority) and the General Companies Direction (Direction Générale des Entreprises), held on 14 November 2016, about the Telecom Package. We publish here the text as given to the participants.

Our short and medium term vision of the telecoms' market in Europe

Two large scale projects already started, and will continue, on macroscopic scale, in the European telecoms sector.

One of which is the deployment of a local loop access via optical fibre allowing the providing of future services (and the bandwith required to afford those services). The other is the defragmentation of mobile frequencies, to be able to reach a higher bandwhith and especially for the 5G.

Those two projects are considered under an angle leading to a lockdown of market already suffering from a lack of open competition, resulting from the variations of the opening of monopolies in the different Member States. This lockdown is understandable. On mobile, it is needed to bundle the frequencies, which is incompatible with having a lot of operators of different sizes. On the fixed-line market, investements are very high and only some large companies supported by Member States can progress on those projects, especially in France.

This effect of reconcentration on the historical operators which became private operators, does not represent the general interest as we understand it. If there must be a renewed concentration of infrastructure operators, concerning mobile and/or fixed-line, we believe that the actor emerging from it would have (alone or sharing it with very few colleagues) the monopoly of the most fundamental infrastructure of the 21st Century. It would be incomprehensible that this infrastructure would belong to private actors more specialized in tax optimization and corruption of former European Commissioners.

If this regrouping must happen, the result must necessarily be under the control of the public power. And as the goal is to create a Digital Single Market, the public power must be the European Union. Operators on this public infrastructure must be private actors and numerous, to confer the necessary diversity in the current society, to offer diversity in the ways of expression and communication. Or, putting things differently, to address all sectors of the market and not only the most covered by operators for large public.

Objectives to reach

According to our positions, on the technical side, the recommended objectives concerning the Telecoms market are the following.

First of all, the deployment of a local fibre loop. The ridiculous situation in high density French areas doesn't appear to us as desirable: few operators deploy few competing networks to cover the same area, it is a guarantee of inefficiency. The coherence of the management of the network should lead to the deployment of one only local fibre loop to cover a certain area.

Of course, the diversity of the areas leads that solutions used in mountain villages are not the same that those in large-building housing areas and therefore there is no particular reason that the management of this infrastructure should be the same in all areas and done by the same actor. But in all cases, the efficiency of the investment and the management of this infrastructure must lead to a local fibre loop in each area and thus, under the control of the public power.

The public power having also the mission to manage the balance within the local areas, and between the local areas. We believe that it is important that the whole must be coordinated, and displayed as consistently reasonable for operators that will offer services on this local fibre, in order to finally offer this Digital Single Market in Europe. It is not yet the turn taken by the deployment of the optic fibre in France: in high density areas, the backlog is building up and the result is chaotic. In dense areas, the private operators in command and owning the local loop have no obligation whatsoever of opening their network on the market, preventing this way any form of competition through services.

On the mobile market, regrouping frequencies is necessary. We will not be able to reach the objectives of very high mobile speed on frequency bandwiths as narrow as those distributed currently to operators. If this regrouping goes through a narrowing of the number of mobile operators, on the scale of the Single Market, then the result will consist in a private and oligarchic market, harmful for innovation and in terms of guarantees for liberties of the citizens of the Digital Europe, harmful also on the openess of the society and harmful for consumers.

It would be recommended to consider this bundling of frequencies throught the eye of a large European public service, implementing the radio infrastructure and renting it under fair and transparent conditions to all European operators no matter their usual consumer catchment area. This large public infrastructure would be given, one area at the time, to private operators as a delegation of public service, as long as the conditions of the openess of the markets are met and as none of the operators is in charge of deploying a local radio loop (it would be a priviledged position concerning its competitors, precisely what Telecom Directives try to forbid since 1997 with very limited success).

The objectives to reach are rather simple for us to define:

  • each local fibre loop, area by area, must be controlled by the public power;
  • the local radio loop must be deployed at the European level, by bundling frequencies, for a better technical efficiency;
  • the entity in charge of the deployment and the maintenance of a local loop must be forbidden to operate it and must obey public and transparent rules for the marketing towards all European operators that are interested;
  • those local loops must allow to broadcast network access in all Europe, for all citizens.

The Telecom Package fails to meet those objectives

The Telecom Package, as proposed to the European Parliament by the European Commission, fails to meet those objectives, because of its lack of clearly defining them in the preliminary works. The draft announces blurry objectives that appear to us as very secondary. For example, the fact that investements must be profitable is a vertue for the investors, but it does not appear to us as the definition of general interest or the research for a digital society to ensure the fulfilment of the citizen. In the same way, the reduction of the price for the consumer is a diminished vision of the general interest.

The legislative modifications appear to us not much understandable. They will still require us an important work of analysis to understand all its implications. Typically, the proposals on the regulation for the acces to civil engineering structures lacks clarity. Those elements seem to say that only the acces to civil engeneering structures (street cabinets, inspection chambers, etc.) would be under some market constraint. This approach seems unefficient as it tries to reach, through a devious mean, an objective that is not clearly displayed. In particular, it proposes to regulate the owner of the key of a street cabinet, instead of speaking of the regulation of an essential infrastructure.

The elements we have analysed so far seem to create new contraints for local collectivities who are willing to go further on the development of their area. Those constraints are imposed to guarantee the return of private operators investments who were not willing to participate to this development. In return, the consolidated operators that the project helps and reinforces, are not constrained to an openess of the market nor to operate a clear separation between the infrastructure management and the service providing to the public. The whole text seems studied to improve the financial record of few large operators and not designed to allow the empowerment of EU citizens to become real actors of the network, or to allow the diversification of initiatives and innovations.

Improvements are possible

Considering that according to us, the general orientation of the text must be revised, it should be necessary to clearly establish that a local loop covering an area must be open to all actors, in non-discriminating conditions and with certain guarantees. It does not seem to us possible to refocus the entire text in this direction. The actors whose pressure shaped the current version have too much weight for us to be able to entirely counterbalance them. Our vision of what a recommended telecoms market would be is rather simple: numerous local loops operators, rooted in the specificities of each EU territory, a equalisation between all those actors so that the most successful areas help to develop the least successful ones, access offers to the open local loops, equalised and allowing all EU actors to act where they want without any worries of borders and therefore numerous service providers on those networks. It is, according to us, the definition of the Digital Single Market. This objective which matches with the one of an open society, where network skills irrigate the whole territory of Europe, does not appear as reacheable from this draft. We will therefore try to table proposals that are compatible with the needs of the present forces so we can come closer to this vision of the general interest.

We identified some possible improvements.

First of all, introducing the notion of asymmetric regulation based on the size of the actors and not on their historical position on the market. The simple size difference, especially considering that the identified market is relevant or having a major issue, is creating asymmetry. It is even resolved in the sales to private individuals realised according to specific rules (Consumer Code in France). The old notion of powerful actor, according to a national market and equivalent to the notion of a historic operator, has lived. There can be two types of powerful operators. Those who own the access monopoly to an essentiel ressource on the local level. And those whose size allows to create a market as they wish with no mention whatsoever to competition.

The access to the local loop as a monopolistic essential resource must not be analysed from a macroscopic point of view, on a national or European market, but from the point of view of the final user. If the housing is connected to a single local loop (as recommended for obvious reasons of efficiency in relation with other parallel local loops), then this local loop is a monopoly and must be regulated. The existence of various local loops, like in the mobile market, modifies only slightly the analysis if those local loops are reproductible without financial constraints or heavy regulations. Typically, the local mobile loop based on frequencies which exclusive use is given through a license, is not reproductible. On the contrary, the local radio loop, when it is used to deploy fixed-line accesses on open frequencies, is reproductible without heavy investments and without regulation constraints or without access issues to scarce resources.

Concerning the obligations for powerful operators, they must be of two nature. On the one hand, allowing a good cohabitation between various similar actors, for example throught the mutualisation of infrastructures (masts, civil engineering, etc.) or allowing the extension of a local loop ; and, on the other hand, allowing different Internet Access Providers, no matter where they are in Europe, to provide their services on the local loop in question, especially through providing bitstream offers.

Indeed, in the structuration of markets, passive offers (full unbundling, historically speaking) and bitstream offers are complementary, and allow to provide different servces to different publics. Passive access offers on the local fibre loop, for example, do not allow operators specialised in SME to provide adapted services, which lead to a backlog for those companies in the digital area. The observation is the same for a large number of associative access providers, which activity is not possible on the fibre only in areas where we deploy our own local loop. Citizens that wish to choose an associative structure for their Internet access must agree to stay on ADSL, even is an optic fibre loop is deployed on their areas. This comparison between those two markets, which lead to this converging analysis, is there are niche markets that only concern a small percentage of accesses for a given area.

This lack is identified by the ARCEP in their lasted fixed-line market analysis, but the new EU framework could make the regulation actions even more complex in this domain.

Finally, the modifications of the operations and attributions of the BEREC make us fear a big step backwards. The BEREC is already lacking of efficiency, as testifies the very uncoordinated state of the EU telecom market and the total closure of borders between Member States. Taking BEREC's independence, by making it closer to the Commission, does not appear to us as an improvement regarding those issues. We believe, on the contrary, that the BEREC lacks of clear objectives and the necessary powers as well as the independence that is needed for a regulator.

The objectives of the regulation, for example, do not speak nor of general interest, nor of open society connected to the Internet, nor the major role of Internet access in a democratic modern society. Although, those are the real objectives, the market is merely one way to reach them.

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