Having read trough the recent NGA recommandation, I would like to share a few toughts:
1. Market definition. There are some interesting elements on the Commission's view on market definition in footnote 28 of the staff working document that is joined to the Recommandation:
"From a short-term point of view, mobile-for-fixed substitution at present is actually waning in many parts of the EU. In the long-term, while mobile HSPA services might arguably be regarded as at least partially substitutable for the typical ADSL connections serving the mass segments of the current EU broadband market (65% of all users), they clearly are not substitutable for VDSL or even GPON. LTE technology, offering much higher bandwidth, as yet needs to be deployed. Large-scale LTE deployment in the EU will probably require further spectrum resources (not only in the 790-862 MHz band), and will remain subject to the familiar – and important - capacity constraints of cellular networks, with a large - and varying - number of users having to share the total bandwidth of one cell. LTE networks will also have to be much denser than current mobile networks – i.e. in need of significantly more base stations – and will be expensive to build. Overall, commercial deployment appears likely only by 2013 or 2014".
"From a short-term point of view, mobile-for-fixed substitution at present is actually waning in many parts of the EU. In the long-term, while mobile HSPA services might arguably be regarded as at least partially substitutable for the typical ADSL connections serving the mass segments of the current EU broadband market (65% of all users), they clearly are not substitutable for VDSL or even GPON. LTE technology, offering much higher bandwidth, as yet needs to be deployed. Large-scale LTE deployment in the EU will probably require further spectrum resources (not only in the 790-862 MHz band), and will remain subject to the familiar – and important - capacity constraints of cellular networks, with a large - and varying - number of users having to share the total bandwidth of one cell. LTE networks will also have to be much denser than current mobile networks – i.e. in need of significantly more base stations – and will be expensive to build. Overall, commercial deployment appears likely only by 2013 or 2014".
2. Efficiency. I am always surprized by the way the Commission adopts very diverging views in its different recommandations: in its recommdnation on termination rates, the emphasis is "efficient costs" to justify reducing access costs (termination rates) while in the NGA recommandation the emphasis is on "efficient infrastructure" to justify increasing access costs (risk premium on access to NGA)...
In this regards, it is also intersting to note that the Commission classify market shares as "uncertain factors", suggesting that they have nothing to do with efficiency.
In this context, "Efficiency" seems nothing more than the perfect word for regulators to justify any kind of regulatory policy, even diverging ones...
3. Margin squeeze. The Recommandation supports price control obligations based on margin squeeze tests. The Recommandation makes cristally clear that the REO test is to be preferred over the AEO test in an ex ante context. In this regard, see previous posts on AG opinion and the article I co-authored below.
4. Risk premium/risk sharing. The Recommandation provides some guidelines for the application of the principle of risk premium and risk sharing in annex I. Among those, is the fact that risk premium should be regularly assessed and should decrease as risk diminish.
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