ComReg’s decision on Bitstream access forms the latest in its suite of wholesale broadband access (“WBA”) decisions.
In summary, the decision:
- Imposes a national cost orientation obligation on eircom for current generation Bitstream services split between (a) Local Exchange Areas (“LEAs”), and (b) areas Outside the LEAs.
The cost orientation obligation for each is based on the historic cost accounting (“HCA”) methodology and, is framed such that eircom should recover “no more than the actual incurred costs (adjusted for efficiency, plus a reasonable rate of return) associated with the provision of the WBA”. In the case of LEAs, the cost orientation obligation should be calculated on a national basis, and in the case of areas Outside the LEA, with respect to the relevant area. Should eircom wish to introduce a price change for areas Outside the LEA, eircom must first demonstrate to ComReg that the ‘new’ price will meet the cost orientation test and cannot introduce any new prices for areas Outside the LEA without ComReg’s prior approval; and
- Withdraws the retail minus price control, and replaces it with a retail margin squeeze test.
For clarification, an LEA is understood by ComReg to comprise exchange areas where there is a presence of cable infrastructure, local loop unbundling (“LLU”) based competition, and prospectively, the potential for the roll-out of next generation access (“NGA”). By contrast, areas Outside the LEAs are considered to be areas which have less / no infrastructure based competition and where the WBA market is unlikely to become competitive prospectively.
Although ComReg noted in respect of areas Outside the LEA, that the Electricity Supply Board (through ESB Networks) and Vodafone have indicated their intention to enter the Irish wholesale broadband market by leveraging from ESB’s power transmission network, ComReg considered that the initial roll-out will be confined to areas that are likely to form part of the LEA. Accordingly, ComReg considered that the existence of the ESB / Vodafone JV would not detract from ComReg’s view that it is unlikely any commercial operator will replicate eircom’s network. Rather, ComReg believes that any investment in NGA broadband Outside the LEA will likely be through State-led intervention in the form of the National Broadband Plan (“NBP”).
In order to enable ComReg to monitor compliance with the cost orientation obligation, eircom is required to reconcile its Regulated Accounts on an annual basis (ie, the wholesale current generation results from the Regulated Accounts with the planned costs and revenues contained in the Bitstream cost model over the duration of the model). Additionally, eircom is required to provide to ComReg the underlying supporting information on which its reconciliation is based.
The decision also provides for a number of other protective measures to remain in place such as:
- The existing WBA Price Floors set out in ComReg’s 2012 WBA decision, so as to avoid eircom from setting Bitstream prices too low such that they could discourage investment in LLU or other infrastructure operators from investing.
- The bottom-up long run average incremental costs plus an apportionment of joint and common costs (“BU-LRAIC+”) approach adopted in ComReg’s 2012 LLU pricing decision, for ‘access’ services provided over eircom’s access network (eg, the physical infrastructure of ducts, trenches, copper cables etc between the eircom exchange and the end-user’s premises).
- Cost orientation for Standalone Broadband (“SABB”) as regards the wholesale current generation SABB access product launched by eircom in July 2013.
ComReg considers that the WBA decision when coupled with its related decisions on Bundles, NGA and WBA price floors “should ensure that competition is incentivised and fostered in the long term so that end-users benefit from a wide variety of choice at affordable prices”.