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Economic replicability testing for NGA services

EXECUTIVE SUMMARY

Introduction

1. ETNO has commissioned CRA to prepare this report on economic replicability testing in the context of the Commission’s Recommendation on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment (the 2013 Recommendation)1 and the BEREC guidance on accounting approaches to economic replicability testing.2 The purpose of this report is to analyse these two documents and recommend a consistent and proportionate approach regarding the parameters and procedures of economic replicability tests in the context of next generation access (NGA) services.

2. The concept of an “economic replicability test” (ERT) was first introduced by the 2013 Recommendation and is specifically intended to apply to NGA services. The Commission has clarified that the ERT concept is distinct not only from margin squeeze tests under competition law, but also from margin squeeze tests applied to current generation access (CGA) services by national regulatory authorities (NRAs) under sector regulation powers.

3. Where economic replicability testing of NGA services does take place, it will only be in circumstances where there already exists a “demonstrable retail price constraint” either from CGA-based competitors or alternative infrastructures (or both). Given that the circumstances in which economic replicability testing will occur are narrowed in this way, it is reasonable to expect a fair degree of harmony across countries in the procedures and parameters used in economic replicability testing. A largely consistent approach to economic replicability testing is also desirable from the perspective of the internal market and in the interests of predictable regulatory conditions for access providers and access seekers operating throughout Europe.

4. The consistent and proportionate approach that we recommend is guided by the aim of the 2013 Recommendation, which we interpret to be the promotion of efficient investment in NGA infrastructure while simultaneously safeguarding the degree of competition that already exists (including that based on CGA and alternative infrastructures such as cable). We offer our recommendations for a consistent and proportionate approach to economic replicability testing under the 2013 Recommendation in the hope that they will contribute to the achievement of the Commission’s Digital Agenda for Europe (DAE) investment goals while safeguarding the competition and investment that has been fostered over many years under the Commission’s regulatory framework for electronic communications.

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Source: ETNO

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