Discussion Papers

Stefano Lucidi, Ulrich Stumpf

Regulatory Approaches to Prevent Anti-Competitive Effects of Triple-Play Products

No. 369 / June 2012

(Full version only available in German)

Summary

The widespread availability of broadband connections, increasing transmission bandwidths and the high degree of digitalization in recent years have made triple-play offers become more important. Both telecommunications providers and cable operators are selling packages consisting of a telephone line, high-speed Internet access and television. Through triple-play bundles cable operators have become serious competitors of telecom companies.

Triple-play packages therefore have moved into the focus of European regulatory authorities and they already play a significant role in market reviews. The present study deals with two resulting challenges for telecommunications regulation: i) Does the increasing prevalence of triple-play products require an adaption of the relevant market definition as set out in the EU regulatory framework for electronic communications? ii) What are potential anti-competitive issues resulting from triple-play products and how should the regulatory treatment of bundled products be conceived?

With the increasing importance of triple-play services, the question arises whether bundles constitutes a new relevant market that is separate from the markets for individual products. With the help of the hypothetical-monopolist test this question is examined in more detail on the basis of price data from Germany, the Netherlands and Belgium. The analysis compares consumer expenditures for triple-play products and combinations of double-play products and/or standalone services from different operators. As long as customers, as a result of the price increase for the triple play offering, would "unpick" the bundle and revert back to buying combinations of double play and/or stand-alone offerings, there would be no separate market for triple play bundles.

As triple-play offers include both regulated products (telephone and internet) and non-regulated products (TV), the question raises whether existing regulatory measures are sufficient to address potential competition problems. Anti-competitive threats can arise mainly due to leveraging of market power through denial of access to wholesale products, margin squeezes or predatory pricing. The discussion paper addresses technical as well as economic replicability of bundles by alternative operators.

The rapid development of multi-play products is expecting to continue in the near future and with quadruple-play services, combining triple-play services with wireless service provisions, regulation will soon face a new challenge.

Discussion Paper is available for download.

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