Discussion Papers

Kenneth R. Carter, Dieter Elixmann, J. Scott Marcus
Strategic and Regulatory Aspects of Cooperation in Next Generation Access (NGA) projects

No. 356/June 2011

(full version only available in German)

Summary

The study focuses on cooperation among organisations in Next Generation Access (NGA) broadband deployment. The study is both analytical and empirical.

We address a variety of key issues. First, we highlight from a theoretical perspective the incentives for cooperation. Cooperation is different on the one hand from the integration of activities within a single entity, and on the other hand from a transactional relationship between different entities. The study covers three forms of cooperation: Joint asset ownership, joint venture, and the reciprocal access that entities are allowing each other. We address why firms cooperate and what the advantages and disadvantages of cooperation are. Second, we analyse cooperation issues specifically in the field of broadband deployment. To this end, based on general experience with cooperative ventures in communications, we illuminate cooperative players and their motivations, we expand on their choice of partners, we focus on the elements to be shared under cooperative arrangements, and we address aspects of cooperation over time (i.e. dynamic aspects). Third, we provide a variety of case studies based on European experience. For use of one another’s facilities, we discuss the reciprocal cooperation activities of Deutsche Telekom, and the cooperation between Telecom Italia and Fastweb. For joint ownership, we focus on a venture between market participants in Italy, a cooperation between Vodafone and O2, and Deutsche Telekom’s municipal cooperative ventures. Regarding joint ventures, we present the example of Reggefiber and KPN in the Netherlands, and of Plusnet in Germany. Fourth, we address Competition Law issues. In this regard, we focus in particular on the recent Bundeskartellamt’s Guidelines on cooperation. The Guidelines distinguishes between cases where the network operator with SMP (Deutsche Telecom) is involved and ventures involving only non-SMP regional carriers. Fifth, we focus on cooperation under the European regulatory framework for electronic communications. To this end, we refer on the one hand to the Framework Directive and the 2010 NGA recommendations. We review the issue of cooperation with an SMP operator as a party and we discuss the risk of joint dominance. We also consider the relevance of cooperation to universal service. Sixth, the study considers European State Aid rules vis-á-vis broadband in light of cooperative ventures. Seventh, we focus on market related issues regarding cooperation, i.e. we address implications for investment and innovation, the risk of collusion, the potential presence of joint dominance, the issue of exclusion of third parties, and the risk of promoting inefficient entry. Eighth, we address the issue of risk in the context of cooperation, i.e. we highlight problems of inappropriate risk premium and the apportionment of risk between the parties.

Discussion Paper is available for download.

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