Much of the debate around new network investment has focused on the fact that, since such
issue is whether the existing dominance is transferred to the new network. Many incumbents in the
communication market still have market power which arises from their former monopoly position so that,
even though investment in fibre networks is “new”, incumbents are still leveraging their historical market
power and there is a risk that, if exempt from regulation, such investment would result in the creation of
ascertaining potential bottlenecks where regulatory action is required as fibre is brought closer to the
consumer. Increasingly, a number of incumbent operators that are subject to asymmetric regulation have
argued that with respect to next generation access networks there should be asymmetric geographic
regulation, that is, regulatory forbearance should be adopted in geographic areas (usually the more densely
populated cities) where facility-based competition is developing.
markets are defined, and a single national market approach, with varied remedies by geography. A
DSTI/ICCP/CISP(2007)2/FINAL
27
geographic market approach would require defining a market for access and services at the geographical
level and then undertaking market power assessments for each of the designated geographic areas.
Asymmetric geographic regulation may also result in geographic price differentiation at the wholesale and
retail level – lower prices in competitive cities and higher prices in smaller cities and regions.There would
also be an incentive for the dominant operator to try and gain market share in large cities including through
cross-subsidisation. In addition, it may be difficult to identify the relevant criteria for the definition of
geographic markets, and the segmentation of the market may be excessive, resulting in an overly complex
regulatory environment.
The purpose of ex ante regulations is to ensure that barriers to market entry are minimised. In this
context, the first requirement is to define what ex ante regulation means in the context of the roll-out of
fibre networks. Maintaining unbundling as the cornerstone of regulation is not helpful if, for technical
and/or economic reasons, unbundling is not possible. Therefore, short from mandating that the network
topology chosen by a firm with an existing dominant position in the fixed access market should allow for
unbundling (see scenario 3 below), the main barriers to market entry in the roll-out of fibre are likely to be
construction costs and access to homes/buildings.
Construction costs (civil engineering costs) are estimated at around 60-80% of total costs in rolling
out a FTTH network and constitute a large percentage of total network costs. Incumbents have a
significant advantage because their historical monopoly position has given them existing rights of way and
they usually own the ducts used by copper networks (which often means they do not pay for rights of way).
Other utilities, such as electric power companies, also have access to rights of way and ducts. The number
of administrative layers (local municipal councils, regional bodies, etc.) often creates difficulties for new
entrants in obtaining access to rights of way and ducts. Where municipalities are pro-active in trying to
ensure that fibre networks are developed, they often provide access to municipal rights of way and ducts on
reasonable terms. For FTTN networks street cabinets and access to them are important. Several authorities
in OECD countries are addressing this issue. In the United States the Telecommunications Act of 1996, as
well as various FCC orders that implement the statute, set forth numerous requirements that US local
carriers must meet in order to provide competitive carriers reasonable and non-discriminatory access to
ducts and rights-of-way. In France the ARCEP published at the end of 2007 the results of a consultation on
duct sharing, and initiated at the beginning of 2008 technical work with the operators on infrastructure
sharing and on the localisation of the adequate points of mutualisation. In Japan a guideline for use of
poles, ducts, conduits and similar facilities owned by public utilities was amended in 2007 to add
provisions regarding procedures to facilitate the installation of lines in the last mile.
60
In this context, the main ex ante regulations needed to reduce bottlenecks include:
Ensuring access to rights of way at reasonable prices, and preferably at no charge, for new
entrants and incumbents.
Ensuring access by new entrants to existing ducts/poles of both network operators and utility
companies and municipalities.
Regulations to ensure the sharing of access to the inside wiring of apartment buildings and
homes.
Facilitate access to street cabinets and collocation in street cabinets. Regulators need to work
with municipalities to find solutions to avoid excessive duplication of street cabinets and/or
restrictions on investing in street cabinets by new entrants.
Municipal networks can play an important role in enhancing competition in fibre networks. If
these develop governments should encourage them to be open networks, that is providing dark
fibre to service providers rather than becoming themselves service providers. Nor should the
DSTI/ICCP/CISP(2007)2/FINAL
28
existence of a municipal network providing dark fibre mean that investment in other fibre
networks in that municipality should be prevented.
Where mandated, ensuring wholesale broadband access is provided on a non-discriminatory basis
which must ensure that the quality of service provided to wholesale service providers is the same
as that of the owner and operator of the network.
Where adequate facilities-based alternatives do not exist, consider applying local loop
unbundling policies to new fibre networks, in particular sub-loop unbundling since with certain
fibre configurations (FTTN) new entrants will need access to street cabinets.