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03.04.2020

No. 460: Indications for the replicability of NGA connections in the context of Article 61(3) of the EECC

No. 460: Indications for the replicability of NGA connections in the context of Article 61(3) of the EECC (March 2020)

Authors: Stefano Lucidi, Martin Ockenfels, Bernd Sörries

(full version only available in German)

Summary

Like the old Framework Directive with Art. 12, the European Electronic Communications Code (EECC), which is to be transposed into national law by December 21, 2020, contains access claims against providers who do not have significant market power. The new regulation explicitly links an access obligation to the fact that replication of network elements would be economically inefficient or practically impossible.

With the help of the NGA model developed by WIK, indications can be obtained as to whether and to what extent replicability of the network is possible at different access points in the context of the application of Article 61(3) of the EECC. In particular, the population density or subscriber density plays an important role in the replicability of network infrastructures. In the NGA model, subscriber density is represented by considering twenty clusters. The model compares the costs of an FTTH-P2P network and expected revenues. In order to investigate the question of replicability, this study defines scenarios for 3 possible access points: 1) access to the building's internal infrastructure; 2) access to the street cabinet (SC); 3) access to the Metropolitan Point of Presence (MPoP).

The analyses show that it is not profitable for competitors to expand a further, additional fibre optic network to the access point up to the building's internal infrastructure in case there already is an existing FTTH network. This is due to the fact that the market share required for a profitable expansion by a competitor cannot be achieved. In this context, it should be noted, among other things, that approximately 2/3 of households have a broadband cable connection, which must also be taken into account when estimating the addressable market for an FTTH roll out. A parallel expansion of two fibre optic networks to the end customer is unprofitable in all clusters (i.e. independently of the level of urbanisation). In contrast, parallel fibre roll-out up to the SC by a competitor in combination with obtaining a wholesale product at the SC can be profitable for competitors in certain cases (e.g. in clusters with high subscriber density) as long as the market share of the existing infrastructure provider is not too high. Access at the MPoP, is generally more profitable for competitors than access at the SC, especially because the investment costs for a competitor are on average around 50% lower and more subscribers can be reached. Nevertheless, even with access at the MPoP, a case-by-case analysis will be necessary. Depending on the market conditions (market shares of alternative infrastructure providers, different wholesale prices), it should always be examined whether a certain access area allows profitable access.

Diskussion Paper is available for download.

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