Discussion Papers

No. 405: State funded broadband infrastructure - pricing wholesale Network access
 

Authors: Caroline Held, Gabriele Kulenkampff, Thomas Plückebaum
March 2016

(Full Version only available in German language)

Summary

Subsidised broadband rollout projects have to accept state aid guidelines, which require regulations ("State Aid Rules") on a European and national level. The open access obligation is an indispensable condition to receive state aid. The State Aid Guidelines aim to replicate market conditions like those prevailing in other competitive broadband markets in a way that both, aid recipient and the access requesting party, may offer retail services at normal market terms.  

Against this background the paper focusses on the pricing of such state aid funded NGA wholesale access products. The EU legislation envisages the following: Appropriate benchmarks should be used provided such references are available in other comparable, more competitive areas of the country or the Union. In the absence of such benchmarks, prices already set or approved by the NRA for the markets and services concerned shall be taken. If this is also not possible the pricing should follow the principles of cost orientation pursuant to the methodology established in accordance with the sectorial regulatory framework. 

Firstly, the paper introduces to the European and national legislations for broadband rollout. This is followed by an overview of the legislation with regard to the NGA rollout in Germany and our assessment of the current NGA market situation. Thirdly, we address possible requirements on the access price setting: consideration of regional cost differences; availability of the required references; consistency with the SMP regulation; incentive compatibility with regard to the broadband rollout. On this basis we analyse and assess in the next step the following pricing / costing rules: (1) benchmarks, (2) the application of regulated wholesale prices, (3) the modification of regulated wholesale prices, (4) the calculation of the network charge on basis of the recipient’s business case, (5) the application of cost models on a local level, as well as (6) the price setting by means of cost verification. Additionally, we expand on (7) the retail minus pricing approach.  

Discussion Paper is available for download.

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