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The European Commission has given its green light last month to the Spanish draft regulation on wholesale broadband access, notified by the Spanish regulator, the ComisiÃ³n del mercado de las telecomunicaciones (CMT). However, the Commission said it still believes that regulation of wholesale broadband access should not be limited to speeds of up to 30 Mb/s. On the basis of the Commission's presently limited powers of oversight, it can only invite the CMT to change its regulatory approach in this regard.
Broadband is currently regulated in all EU member states by national telecoms regulators. Operators holding significant market power are required to provide access to their networks to enable consumers to choose between broadband providers. In accordance with the EU's telecom rules, where a national regulator determines that a relevant market is not effectively competitive, it identifies operators with significant market power and imposes appropriate regulatory obligations.
The legal basis for the notification is Article 7 of the Electronic Communications Framework Directive (2002/21/EC), the principal instrument for EU regulation of electronic communications. Under the procedures set out under this article, the national regulatory authorities are required, in consultation with industry, to analyze their national markets for electronic communications and propose appropriate regulatory measures to address market failures.
National regulators are required to notify their regulatory proposals to the Commission and other national regulators under the so-called Article 7 procedure. The Commission and other national regulators may make comments such draft measures. In certain cases (concerning market definition and analysis), the Commission may also, following in-depth investigation, require a regulator to withdraw a proposed measure due to lack of compatibility with EU law.
The Commission assesses the majority of cases within a one-month "phase one" procedure, after which it may choose to approve or comment on the proposed measures. However, if the Commission considers that the proposed measure would create a barrier to the single market, or has serious doubts as to its compatibility with community law, the Commission opens a "second phase" investigation and the procedure's deadline is extended for a further two months.
Following this in-depth investigation, the Commission may, if its concerns are confirmed, require a regulator to withdraw a proposed measure (a possibility known as power of veto). This power can only be exercised in relation to the proposed market definition or analysis. As regards proposed remedies, the Commission may only make comments.
On 13 November, the Commission informed the CMT about its serious doubts regarding the definition of the wholesale access market in the Spanish draft broadband regulation. The Commission considered that CMT provided insufficient evidence to support the exclusion of speeds above 30 Mb/s from the market. Moreover, the Commission considered that the evidence provided by CMT did not warrant the inclusion of alternative infrastructures - cable and local loop unbundling (LLU) - in the market definition. The geographic differentiation of remedies was also queried.
On December 4, the CMT notified a revised version of the draft measures. The amended text no longer defines the relevant product market with regard to the 30 Mb/s speed limit and excludes cable and LLU from the relevant market. The latter is justified by the weak competitive constraints that cable and LLU exercise on TelefÃ³nica at the retail level, even in densely populated areas, which reinforces the conclusion that the relevant geographic market is national. Also, the CMT no longer differentiates remedies geographically.
The Commission said it welcomes these changes and considers that the amendments introduced by the CMT to its original notification remove the serious doubts regarding the market definition of the proposed regulation.
However, the Commission maintains certain concerns about the remedies proposed by the CMT. Although CMT had defined the relevant market as including all speeds, it proposes to impose wholesale broadband access only for speeds of up to 30 Mb/s. The Commission considers that there is a risk that this could hinder the competitive process in Spain, as there is no evidence that entrants will be able to match the large-scale fibre deployment plans of TelefÃ³nica in the near future. With a fibre-based wholesale broadband access product which is limited in speed, TelefÃ³nica could pre-empt the market for retail broadband services during the deployment of fibre in Spain. To prevent this from happening, the Commission invites the CMT to impose remedies for wholesale access products also in excess of 30 Mb/s.
Under current EU telecom rules, the Commission can veto an incorrect market analysis by a national regulator, but not an incorrect remedy. Therefore, in the present case, while the Commission was able to tackle effectively the 30 Mb/s threshold at the level of the market definition, it is limited to expressing concerns regarding a remedy having an equivalent outcome. The Commission's proposals to reform the EU's telecom rules would allow it to act also when remedies proposed by a national regulator threaten to hamper the efficient functioning of the single market.
Ari Syrquin is the head of GSCB Law Firm's International Department.