Plum Consulting, London, T +44 (0)20 7047 1919, www.plumconsulting.co.uk

Relevant markets - The Times They are a-Changin’

Brian Williamson

ETNO MLex Regulatory Summit, Brussels

25 April 2013

Plum 2013 2

Plum 2013

Market changes to 2015 & beyond

3

“When the facts change I change my mind, what do you do Sir?” John Maynard Keynes

Plum 2013

Focus on broadband

4

Plum 2013

Intensifying platform competition

Copper (VDSL)

Copper(ADSL)

Fibre/cable

1 10 100

100

10

Capacity GB/month/household

Ba

ndw

idth

Mbp

s

LTE

Vectoring

LTE Advanced

LTE Advanced3G

5

Supply side Demand side

0%

10%

20%

30%

40%

50%

60%

70%

80%

Spain UK France Italy Germany EU5

Smartphone penetration in the EU5

20112012

Source: Plum Consulting, Comscore

LTE & smartphones near ubiquitous by 2015, implementation of July 12 statement accelerates fibre (including VDSL)

Growing at 10 percentage points pa

Plum 2013

Intensifying over-the-top competition

6

WhatsApp first launched 2009

OTT messaging to overtake global SMS in 2013Gigaom, January 2013

The impact of OTT is real - applications are competitive

Plum 2013

Regulation should change too

• Risk of circularity leading to over-regulation

• Consistency with July 12 statement• Separate consideration of non-

discrimination from price control • Don’t price regulate multiple

products/points in value chain

7

Need clear focus on retail competition & all suppliers as starting point for analysis

Focus on wholesale “market”

Only one supplierOver regulation

Plum 2013

Steps for NRA to follow under revised recommendation

8

No

YesWithdraw regulation

Step 1: •Start with retail market•Focus on access, direct

constraints & sub-markets

List of relevant wholesale markets

Guidance on remediesStep 4: Proportionate

remedy on operator with SMP

Step 3: Define notional wholesale market and test

three criteria

Step 2: Is retail market competitive absent

regulation?

Plum 2013

Retail markets as starting point for analysis• Focus

• Access not services • Broadband not narrowband• All available technologies

• Bottlenecks may arise in following markets• Dedicated high capacity broadband access in corporate services market• Broadband access at a fixed location for mass-market customers

• Mobile broadband • Is competitive • Should be considered in assessing competition in broadband access at a

fixed location for mass-market• Scope for inclusion in retail broadband market depends on national

circumstances and future usage

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Plum 2013

Proposals for list of markets

 Market Proposal Reasoning

 1 Remove Anachronistic in broadband worldAccess-based and platform-based competition

 2 Remove OTT competition Mobile voice competition

 3 & 7 Remove (with safeguards)

OTT competition & low price (due to regulation)Symmetric obligations Threat of price control if prices rise

 4 & 5 New approach

Platform competition & changing technologyTrade-offs to consider in relation to preferred approach

 6 Keep Corporate market for dedicated capacity sufficiently distinct from mass market

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Plum 2013

Calls - access, origination & termination• Consistent with focus on broadband access propose that existing

Markets 1 & 2 be removed from the list of relevant markets• Mobile & fixed voice competition• Over the top competition for communications services• Broadband access will remain regulated where justified

• Call termination Markets 3 & 7• Over the top competition & alternative means of reaching people other than

phone number (Facebook identity, device identity in iOS etc.)• Termination rates already low due to regulation• Costly in time and money to continue current approach • Move to alternative approach to provide assurance of good outcomes

– Interconnection and symmetry requirement (Article 5)– Backstop – re-regulate if termination prices rise?

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Plum 2013

List of wholesale markets

• In relation to corporate services• Wholesale terminating segments of leased lines

• In relation to broadband at a fixed location• Wholesale market for passive remedies; and/or• Wholesale market for active remedies

• Appropriate wholesale market for regulation depends on national/local circumstances• Access obligation should apply at only one level - active or passive - in a

network • Passive remedy may not be technically/economically feasible/attractive e.g.

with VDSL/vectoring• Passive remedy may be preferred with co-investment

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