The Belgian Conference of Electronic Communications Sector Regulators (CRC) has imposed wholesale obligations on cable TV broadcasters that it found to have significant market power (SMP).
The obligations include resale of the analog TV offer, access to their digital TV platforms, and broadband Internet resale. The arguments presented by the regulator, alongside evidence from other EU countries including the Netherlands and Germany, suggest the move aims to protect the level of competition in broadband markets, which is increasingly characterized by triple-play offers.
While the rationale behind the decision is understandable, concerns have arisen over the coherence and consistency in carrying out the market review. While a thorough review of the retail market is needed, it has to be done alongside a careful analysis of the wholesale level, especially when a decision departs from the guidelines issued by the EC. Such a flaw could ultimately affect the legitimacy, and the efficacy, of the measures adopted.
The decision by the CRC to impose wholesale obligations on cable operators represents the second effort in the EU in the last two years to regulate a market (broadcasting signals) that is no longer susceptible to ex-ante regulation according to the EC’s 2007 Recommendation on relevant markets (the Netherlands imposed similar measures on cable operators in 2009). What was previously included in market 18 (“Broadcasting transmission services, to deliver broadcast content to end users”) in the 2003 Recommendation is now deemed as naturally tending towards competition.
At this stage, it is unclear whether the Belgian case signals the beginning of a trend towards imposing regulation in this area. If this is the case, it is likely to occur in markets where cable accounts for a large share of fixed broadband connections. The reasons behind the newly imposed obligations are found in the convergence of different services on the same platforms, which has developed steadily on cable networks. The arguments presented by the CRC suggest that not only do the decisions adopted aim to allow competition between broadcasters, but also to enable alternative operators to offer triple-play bundles, which are increasingly common in countries including Belgium and the Netherlands where a significant proportion of broadband connections are cable (approximately 40% in both countries).
It is also fitting that Germany, where cable has a strong presence in the broadcasting sector but DSL dominates in the broadband sector, lifted all obligations previously imposed on dominant cable operators to counter anti-competitive behavior in 2010. These included transparency obligations in regards to signal delivery conditions, discrimination prohibitions, access obligations in respect of signal delivery, and ex-post rates regulation in the case of anti-competitive pricing.
The CRC excluded all other broadcasting technologies from the market definition (terrestrial and satellite digital TV, and “Web-TV”), limiting its ruling to cable TV and IPTV over DSL lines. The players found to have SMP are Telenet, Brutele, Numericable, Tecteo, and AIESH, with each being dominant in one of the five geographic areas in which the CRC segmented the market. The obligations imposed on SMP players include the resale of the analog TV offer, access to their digital TV platforms, and broadband Internet resale (the latter two won’t apply to AIESH, which doesn’t offer these services over its network). The CRC stated that there is an increasing adoption of multi-play bundles by end users, which means that alternative operators have to be in a position to offer similar conditions to be competitive.
While it is acknowledged that an operator might acquire different wholesale services from different networks (Belgacom’s WBA offer, for example), the CRC also recognizes that doing so would increase costs, which would in turn affect retail prices. That knowledge suggests that preserving competition in the broadband market was also a consideration when the CRC was deciding to impose obligations on a market that is generally considered to no longer need regulation in most EU countries.
As the EC noted, the method adopted by the CRC raises severe concerns regardless of the content of the decision itself. It is neither objective, nor appropriate, to impose obligations at the wholesale level based solely on an analysis conducted at the retail level. The danger of departing from the EC’s Recommendation means that a very through review of the wholesale market is necessary, and needs evidence to justify the proposals. The CRC notes that there is currently no wholesale market at all in this sector. However, while it is accepted that exceptions to the Recommendations may occur, they have to be based on a clear and compelling explanation of the reasons behind them. The need to explain is even more important where a regulator decides to impose or maintain ex-ante regulation on a market that hasn’t already been shown to meet the three criteria test.
Approaches like the one adopted by the CRC open up the risk of disproportionate or inappropriate decisions, and could ultimately cause regulatory uncertainty. To avoid such risks, the CRC should have followed the example of the Dutch regulator OPTA, which adopted similar measures for the same markets in 2009. Back then, the EC acknowledged that the exceptions were fully justified, and only invited the OPTA to closely monitor the market in order to keep the impositions in place for as short a time as possible – with particular regards to the “WLR-C” (wholesale cable rental) obligation.