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WIK online workshops on 19 and 21 January 2021

The new EC Recommendation on Relevant Markets: key changes and implications for the sector

In December 2020, alongside the application of the EU Electronic Communications Code, the European Commission will adopt a new version of the Recommendation on Relevant Markets susceptible to ex ante regulation. WIK is conducting two online workshops on the implications of the new relevant markets recommendation. The first workshop will take place on 19 January 2021 and will be held in English. Kamila Kloc from the European Commission will provide an overview of the Recommendation, highlight key changes and expected impacts for NRAs and stakeholders. The authors of the study will explore central issues of the new market recommendation and its implications for electronic communication markets. As the market and competition conditions differ significantly between the member states, on 21 January WIK invites to a second workshop where we will take a deep dive into the implications of the new relevant markets recommendation for electronic communication markets in Germany. The second workshop will be held in German.

EU Commission publishes study on the Digital Markets Act

The digitisation of services has driven widespread innovation, increased competition and consumer benefits. However, digitisation has also been associated with the ability of certain players to act as gatekeepers, with the power to impose unfair terms on dependent businesses to limit the scope for dynamic new entry.

Available evidence suggests that existing measures are insufficient to address these problems, and that Europe would benefit from the introduction of EU-wide legislation to apply ex ante regulatory obligations on gatekeeper platforms. The impact of this measure could be maximised by combining clear requirements in the legislation with the ability to apply more tailored solutions in cases where it is not possible to make the designation of gatekeepers or design of associated obligations entirely self-executing. Such measures would best be applied by the European Commission with the support of a network of experts from national administrations.

Cost savings of infrastructure sharing in the context of 5G introduction

Mobile network infrastructure sharing enables network operators to realise cost savings. Cost saving advantages are accompanied by drawbacks. Regulatory specifications for infrastructure sharing must balance benefits and draw-backs. The present work aims to support the decision making process in the field of competition policy and regulation with respect to infrastructure sharing in the context of the beginning 5G roll-out, by shining light on the various aspects of the topic. The main part of this study consists of calculations concerning cost saving potentials associated with infrastructure sharing in the context of 5G introduction. In this way cost saving advantages of network operators involved are quantified which can support the (regulatory) decision-making process.

“brave interconnected world?”

WIK study assesses potential problems related to smart consumer products

The number of connected products for consumers is continuously increasing and offers various extended applications and additional value compared to conventional product variants. The discussion paper at hand analyzes current fields of applications , studies related competition and consumer protection problems and assesses a possible need for regulation.

Our analysis indicates that the current regulatory framework is basically suitable for handling possible problems in the consumer IoT area. Nevertheless, decision makers should carefully monitor future developments in the fields of competition policy (especially platform regulation), consumer and data protection as well as IT security. The competition problems that are already apparent today could increase further due to possible gatekeeper roles of manufacturers and lock-in effects in ecosystems of leading providers. In addition, as a result of the increasing use of microphones and cameras in connected devices, violations against existing rules in the areas of consumer / data protection become more likely.

Impact of coverage obligations on mobile coverage in the EU

Using econometric methods, we determined the extent to which past legal coverage obligations in the context of spectrum allocation have had an actual impact on 3G and 4G mobile coverage across EU member states. The comparison of countries shows that coverage obligations have a consistently positive and significant effect on mobile coverage.

WIK estimates the costs of a full gigabit deployment in Bavaria

On behalf of the Alliance 90/The Greens group in the Bavarian State Parliament, WIK examined the progress in broadband deployment in recent years and calculated the costs of a state-wide roll-out of gigabit networks in Bavaria.

In a nationwide comparison, broadband coverage in Bavaria has performed above average in all bandwidth ranges surveyed. Nevertheless, FTTH coverage remains relatively low, especially in an international comparison. The analysis shows, that this is, among others, due to the fact, that between 2017 and 2019 a relevant part of broadband subsidies has been spent for FTTC-technology (instead of FTTH).

Based on our calculations, investments of €10.61 billion would be required for a complete FTTH development. Under the assumption that all cable networks will be upgraded to DOCSIS 3.1 and 4.0 in the coming years, the investment requirements reduce to €5.87 billion. In all scenarios necessary subsidies amount to about half a billion euro.

Cloud services and AI-as-a-Service

Current and potential application scenarios and market developments

Cloud computing has already achieved a high level of market penetration with significant growth rates. Cloud services combined with artificial intelligence (AI) applications create new potentials, both for the providers of these services and for users who need a low-threshold access to AI. The aim of the study is to determine the current market situation of these applications (AI-as-a-Service), to identify business strategies of major providers and to de-rive the key factors which will influence further market developments.

WIK study analyses the development of retail offers on the German mobile communications market in the period 2017-2020

Empirical analyses of mobile tarifs provide interesting results on the development of competition

The analysis reveals a wide range of products and services on the German mobile market, which target different end user segments. We observe decreasing prices or increasing data limits at stable prices over time for the majority of tariffs offered. Heavy competition is observable in the low/medium usage segment. In the high usage segment, the variety of offers and the intensity of competition decrease significantly, however. Service providers are hardly able to serve this segment, while competition between MNOs is rather low due to existing differences in network coverage and quality.

WIK supports European Commission in the review process of the Geo-blocking Regulation

Study on the impacts of the extension of the scope of the Geo-blocking Regulation

In order to prevent geo-blocking in cases where it is unjustified, the current Geo-blocking Regulation has been in force since 2018. However, according to Article 9, this Regulation is subject to an evaluation every five years. The first review includes an assessment of the scope of the Regulation, in particular with regard to services providing access to copyright-protected content in the audiovisual sector and certain non-audiovisual sectors (in relation to Article 4). Currently, such services are wholly or at least partially out of the scope of the Regulation.

The study "Study on the impacts of the extension of the scope of the Geo-blocking Regulation to audiovisual and non-audiovisual services giving access to copyright protected content" provides an assessment of the impact of the extension of the scope of the Geo-blocking Regulation with regard to audiovisual and non-audiovisual services giving access to copyrighted content, based on various methodological instruments such as interviews and surveys of industry representatives and consumers, test purchases, and database and literature analysis.

WIK publishes a discussion paper on the adoption of sharing economy platforms

The discussion paper “Platform multihoming - A consumer perspective ” examines the current use of various platforms that can be classified as part of the sharing economy on the basis of an online consumer survey conducted by WIK. The main focus is on two established segments of the sharing economy: the mobility sector and the accommodation sector. In particular, the share of users of sharing platforms in the mobility sector is currently still at a relatively low level. The data analysis reveals that currently only about 5% of the respondents use P2P sharing platforms in the mobility sector as suppliers and/or consumers of mobility services. In contrast, in the accommodation sector this share is about 18%. In addition, multihoming is uncommon in both sectors.

Respondents' personality traits and attitudes have an impact on the use of P2P sharing platforms in both the mobility and accommodation sector. Platform users tend to be more trusting, environmentally aware and sociable than non-users. Likewise users are influenced in their usage decision by social and ecological, but also economic factors. In addition, trust in platforms and platform users as well as the usefulness of platforms also play an important role in the usage decision. The latter factors can also determine multihoming.

Joint production in the delivery market: Letter networks with parcels or parcel networks with letters?

Cost savings and securing quality of universal services due to joint delivery of letters and parcels

The postal markets are undergoing a profound structural change, both nationally and internationally. Digitilisation is changing the forms of communication between consumers, companies and government institutions. As a result, letter volumes have been falling for years, not only in Germany but worldwide. At the same time, the strong growth in e-commerce is leading to an increase of consignments to consumers.

The discussion paper presents the results of a benchmark analysis among seven national postal operators. Overall, the postal companies are striving to exploit the advantages of an existing, nationwide letter delivery network for the delivery of merchandise and to use delivery capacities that have become available due to the decline in letter volumes. In addition, postal operators put significant efforts to organise the last mile in a more flexible and, for letter post and packages, more permeable way in order to better cope with the considerable fluctuations in demand for the delivery of merchandise to consumers.

In a model simulation, the study shows that joint delivery leads to cost savings compared to separate delivery networks. It is expected that Deutsche Post will continue to pursue this strategy in the coming years. Among other things, this strategy helps to secure the quality level in the universal postal service, especially in rural areas.

FTTB/H roll-out activity in Europe

An econometric analysis

The EU's goals for digitization will require considerable efforts to expand high-performance communication networks in the future. The results of econometric analyses point to inter-platform competition between cable and fibre (FTTB/H). However, developments in the direction of a gigabit society and extensive government subsidies for the expansion of fibre could, against the background of the expected future performance of the technologies, lead to broadband cable becoming less attractive as a shared medium in relation to fibre. Prospectively, this could lead to a situation in which only one infrastructure remains in many connection areas, namely FTTB/H.

“To buy, or not to buy”?

How do incumbent operators respond to alternative FTTH-roll-out?

In view of the increasing FTTB/H roll-out of alternative competitors in many countries, the question of strategic reactions of incumbents arises. If a parallel roll-out is not economically viable, one would expect incumbents to ask for FTTB/H wholesale products from alternative competitors (wholebuy). The present paper analyses the relevance of those wholebuy agreements in the country case studies Germany, Denmark, Italy, Austria, Sweden and Spain and analyses common patterns, drivers and barriers of such agreements.

The negative auction as an instrument for coverage of white spots with mobile services

A white-spot auction is a procedure to determine companies that provide area coverage with high-performance mobile services. With the white-spot auction, companies would be determined in a transparent, comprehensible and non-discriminatory procedure to provide coverage to previously unserved households or areas in return for receiving the lowest subsidy. In such an auction, the companies bid voluntarily for a supply obligation for precisely defined white spots (unserved areas), which is linked to a maximum compensation payment fixed in advance. If they bid successfully for the supply obligation for the area, they must meet the specific supply requirements..

International experience and our own conceptual considerations indicate that white-spot auctions are an option to generate coverage of white spots by the mobile network operator who can do so most efficiently in an objective, transparent, non-discriminatory and comprehensible manner. The design of a negative auction must be such that the maximum compensation amounts for the white spots or clusters are appropriate and generate an incentive to participate in the auction. Analytically and empirically sound methods are required to determine the maximum compensation.

Misleading fibre advertisements in Europe

What’s behind the label ‘fibre based’?

A study among European consumers found that there is confusion about the terms used to market broadband access technologies, and as a consequence customers find it difficult to identify which networks provide the best performance. Consumers even think they have fibre access when in fact they do not.

The study found that the strongest and most effective forward-looking interventions in the market have been driven by the National Regulatory Authority or Digital/Telecom Ministry of the country in question rather than the Advertising Authority. Those interventions have ranged from a labelling regime in Italy introduced by AGCOM to a prohibition on the use of the term ‘fibre’ in France except where fibre genuinely reaches into the home or premises.

Policy recommendations are guidelines at EU level by the European Commission to foster the involvement of NRAs and/or Ministries across Europe and better align policy approaches to advertising broadband with the objectives established under the Code. The review of the Broadband Cost Reduction Directive provides a further opportunity to consider mandatory labelling schemes to address the problem.

Copper switch-off; European experience and practical considerations

In general, where FTTH is widely deployed, significant benefits could be achieved by the shutdown of overlapping copper networks. For the operator these are reduced operational costs and an improved business case for its fibre roll-out and for the customer improved quality of service. Successful operators tend to facilitate the process of decommissioning old equipment for customers. They can encourage migration through "plug and play" equipment and procedures that support analogue equipment and save on-site visits. Meanwhile, experience shows that more complex business requirements should still be handled on a case by case basis. However also regulatory measures like a shortening of notice periods for shutting down copper-based main distribution sites, as in Estonia, Sweden and Australia (18 months) compared to up to 60 months.

Estonia and Sweden are still leading the way. Then there are countries with limited fibre deployment such as Germany, Poland and the UK, where attention only recently shifted to the necessary investments. But even in countries where fibre optic cables are widespread, such as Spain and Portugal, the pace of migration is slow. Progress is noticeable in France and the Netherlands, where concrete plans to switch-off the copper lines and roll-out fibre by the incumbent operators have been implemented.

Sustainable and digital - Opportunities for German SMEs

Two future topics for competitiveness in small and medium-sized businesses

Digital transformation increasingly offers new innovation and development opportunities for companies. One of these new opportunities is the implementation and development of corporate sustainability measures. It is important to take a holistic view of sustainability in all its dimensions: Ecological, economic and social. Digital technologies pave the way for sustainable offerings on all three levels.

How can a medium-sized company contribute to the sustainability of commuting employees? Why is a more sustainable software preferable? And how can sustainability and digitization make a valuable contribution in energy management, production or the construction industry? The new Mittelstand-Digital magazine WISSENSCHAFT TRIFFT PRAXIS - issue 14 gives insights into the work of the Mittelstand 4.0 competence centers and introduces best practices of companies that have decided to think sustainability and digitalization together in order to be more innovative and competitive.

Retail and hospitality industries are ready for the next stage of digital transformation

The new Mittelstand-Digital theme booklet addresses the digital transformation for retail and hospitality industries

Contactless payment, check-in or livestream shopping: digitization has already arrived in the retail and hospitality industries. Ever since, many companies have successfully implemented corresponding measures and offers. Online platforms for orders and reservations or customer WIFI are no longer visions of tomorrow, but have been in use in many places for a long time. Digitization in the retail and hospitality industry is now about new platforms, online services, data economy and new business models. It also makes it easier and more sustainable to overcome crises, just like the one currently being experienced with Covid. Because as quickly and massively as Covid has changed public life, many companies have found ways to master this crisis.

The new SME Mittelstand-Digital booklet issue presents some practical examples from the competence centers, that have taken up the challenge of digitization in the retail and hospitality sectors together with small and medium-sized enterprises throughout Germany. From robotics in sales, to chocolate from the 3D printer, to new, necessary changes in business models - the new issue features practical reports and interviews that provide plenty of inspiration for digitization in the retail and hospitality industry.