Determination of ANACOM on the evolution of the ''PT ADSL Network'' wholesale offer
I – Development of broadband
The promotion of a universal access to broadband Internet and, at a wholesale level, conditions to ensure a sustained and competitive development of ADSL services provided to end users constitutes a priority of ANACOM.
ANACOM’s “2004-2006 Business Plan” identifies from the outset the promotion of an effective competition as a strategic objective, paying particular attention to the broadband market, in which ADSL based services are of a relevant nature.
This objective is also stated in the “Broad Plan Options for 2004” where the “mass access and use of the broadband internet” is referred, and in the Program of the XV Government, where “broadband for everyone” at affordable prices is deemed a fundamental technological issue for the acceleration of the Information Society.
Furthermore, these objectives are also shared by the European Commission and the Regulatory Authorities of several Member States, which recently published, after public consultation, a common position within the European Regulators Group (ERG) and the Independent Regulators Group (IRG) on “Bitstream Access” 1https://www.anacom.pt/render.jsp?contentId=55129.
II – O ADSL
In Portugal, PT Comunicações, S.A. (PTC) rendered available in the year 2000 a wholesale service named “PT ADSL Network”, that consists of the offer of connectivity for the transport of broadband IP traffic between terminal points of the access network and traffic aggregation points.
This offer represents one of the three means of access to the local loop, the remaining consisting of the two modalities of local loop unbundling - full unbundling or shared access –, subject to a specific regulatory framework (Regulation EC no. 2887/2000 of 18 December) which establishes for operators with SMP in the market of fixed telephone networks and/or fixed telephone services the obligation to provide unbundled access to the local loop.
The European Commission, in several documents that refer to this matter, has repeatedly considered that these three means of access complement one another. The same point may be inferred from the position expressed by European regulators in the scope of the European Regulators Group (ERG) in its most recent document named “Bitstream Access”.
III – Situation in Portugal
At national level, the “PT ADSL Network” offer has turned out to be an effective instrument to establish mass ADSL services. Notwithstanding, there is also an increasing use and commitment on the part of the remaining operators as regards the use of the local loop unbundling (LLU) offer, which clearly indicates operators intention of investing in their own infrastructure. This will enable a privileged relationship with the final user and an increased control of the services provided, making it possible to offer different and innovative products. However, the number of disaggregated accesses is still small, amounting to around two thousand loops.
In Portugal, at the end of the year 2003, the estimated broadband penetration, in ADSL and cable access per household, was above 10%. It must be emphasised that the market share, concerning the number of ADSL accesses, of the PT Group, at the end of the year 2003, was about 85%, having also increased 2 percentage points as compared to the previous year. Summing up the number of accesses of broadband Internet supported in the cable network of TV Cabo, a subsidiary company of Portugal Telecom, the global market share of PT Group was around 75%, at the end of the year 2003
In view of this scenario, which, up till now, the offer of broadband Internet access supported in cable network has not been regulated so far, the intervention of ANACOM in the “PT ADSL Network” wholesale offer is particularly important.
IV – PTC’s offer
Regarding this type of offers, it has been specially argued that it is essential for the development of competition in the local access that operators are granted the possibility to accede, in a non-discriminatory way, to elements of the network associated to broadband access and transport.
In this respect, the European Commission, in the scope of the 8th Report on the implementation of the telecommunications regulatory package, refers that whenever the historic operator does not offer access at the DSLAM or ATM levels, the National Regulatory Authority may request the historic operator to supply the access at those network levels. In the same document, the Commission also refers that one issue that needs to be examined in detail by the NRAs is the effect of technical restrictions associated to the access offers of historic operators on the remaining operators.
According to the Commission, some historic operators believe that they are in conformity with the rule of non-discrimination by offering access only at that point where access is given to their own retail services or subsidiary companies (at one extreme at the local DSLAM and the other at a national PoP). The Commission considers that, in practise, this may impose heavy transmission costs on a new operator, whose network does not have the same geographic coverage or topography, or alternatively, condemn it to the simple role of reseller, if it cannot control the quality and data rate supplied to the end user, connected through the historic operator’s network to its PoP.
This is why, in the Commission’s opinion, access at the ATM level is of great importance for new entrants, along with access as DSLAM and IP where appropriate, in order to allow them to make full use of their own network (or alternative network offerings) and to control the technical characteristics of the connection to the end user.
By joint initiative of the European Regulators Group (ERG) and the Independent Regulators Group (IRG), a consultation on “Bitstream access” was launched on 14 July 2003, to which national operators also replied (PTC, Novis and ONI).
The replies received show that the new operators, and also Novis and ONI, agree on the importance of the provision of the access at the level of the ATM network (and possibly at the DSLAM level). On the same occasion, PT declared that these access modalities should be rendered available in a non-discriminatory way, if requested by operators2https://www.anacom.pt/render.jsp?contentId=55130.
According to the most recent data, there is an interconnection at the ATM level in the scope of wholesale offers of broadband Internet access, in several Member States of the European Union, namely Austria, Belgium, Denmark, France, Ireland, Italy, the Netherlands, Spain, Sweden and the United Kingdom. The access at the DSLAM level is rendered available only in Belgium. Moreover, an increased development of the core networks, namely the ATM network, can be expected, as a result of the implementation and development of the UMTS.
At present, the parameters of the “PT ADSL Network” offer are under the control of PTC, although the evolution occurred in this wholesale offer have allowed an increasing consistency with the market interests. However, these evolutions have generally been achieved in articulation with the subsidiaries of the PT Group (vide, for example, the decision of ANACOM of 14 July 2002).
With the current offer, there is a strong limitation for the other operators to be able to control even more the technical characteristics of the service provided to their customers.
ANACOM takes the view that the possibility of providers launching services, at the moment they considered appropriate, with an increased independence regarding the conditions defined by PTC, would promote the development of new business models, increased innovation and thus increased competition, at the level of services provided to the end user. Therefore, there would be an evolution from a situation of mere competition for margins where providers in general render similar services.
V – Intervention requests
ANACOM has been formally requested to intervene in this matter, namely to promote the inclusion in the wholesale offer of PTC of more access points and the desegregation of different components (network and service elements), in order to enable a more efficient use of available resources and the definition of retail offer features, namely with respect to data rates, contention fees and other components, such as the quality of service.
SonaeCom, on 21 May 2003, said that there were “in the market operators with national-wide networks technically capable of interconnecting in points closer to the end users, thus maximising the use of their infrastructure”. For this reason, they requested ANACOM to determine that PTC should make available as much interconnection points as technically possible, disaggregating the different components “so that hiring of network and service elements that are not strictly necessary to the operationalization of access and interconnection do not exist”.
ONI, on 16 October 2003, also requested an intervention to the same extent, considering that the present situation, “that within the scope of the European Union, is parallel only to the situation in Greece, prevents ISPs from controlling service parameters, namely the quality thereof, and hindering innovation and the differentiation of services involved.”
VI – View of ANACOM
ANACOM considers important for the development of broadband that the “PT ADSL Network” offer evolves towards offering operators the possibility of interconnecting in an increasing number of points, namely at the ATM network level, that is, towards offering transmission capacity between the end user, connected through an access line, and the interconnection point available to the operator.
In fact, the supply of transmission capacity at these levels shall enable other operators to offer new products with different features, namely regarding data rates, contention fees and other components associated to the quality of service (QoS), and added value with reference to the products currently provided by the wholesale supplier.
The possibility of access in different points is thus important, enabling operators to explore to best advantage the potential of their own network, as well as the features of the service provided to end users. The differentiation of services that operators may achieve shall depend on the architecture of PTC’s ATM network and on the options it provides regarding service categories, contention rates, among other factors relating to the quality of service.
Pilot tests of new functionalities have been recently started by PT (in Madeira), associated to TV and video services supported on the ADSL network, resulting from a significant progress of ADSL standards as well as the maturation thereof. In this light, innovative services aggregating voice, Internet and video may be expected to be provided in the short term.
ANACOM considers that should be provided other service categories in the ATM network in order to enable operators to provide innovative services, namely voice over IP and video. To this end, the clients’ accesses must be connected through ATM switches via virtual paths (VPs), configured through the broadband network of PTC. As a priority, these VPs must be provided in the CBR and VBR classes. In the future, the offer may evolve to provide the UBR+ class or others, according to market needs. Operators will thus be able to control the quality of service, namely the transmission speed and contention rates (the number of users per channel/VP).
In order to speed up the process of promotion of a competitive market of broadband service access, ANACOM takes the view that the “PT ADSL Network” offer should be altered, so that the access to PTC’s transport network is promoted, enabling the evolution towards a more appropriate wholesale product, the launching of new services and an increasing competition in the retail market of broadband services based on ADSL, which shall constitute an access offer that may complement the LLU.
VII – Regulatory framework
ANACOM has intervened several times on the “PT ADSL Network” offer, which exists since December 2000, in order to ensure, within the scope of its competences and duties, compliance with the applicable regulatory principles and meeting of public interest.
ANACOM has repeatedly stated that the PTC’s wholesale offer configures, in regulatory terms, a means of access to its own network and, since it has significant market power it was applied to PTC the regime contained in article 33 of the former regulatory framework of ROFTS, approved by Decree-Law no. 474/99, of November 8.
During the prior hearing to the interested parties, the Law no. 5/2004, of 10 February, came into force, where, within the strict compliance with the community framework, some obligations fixed in the former regulatory framework are expected to be maintained until ANACOM’s determination on the imposition, maintenance, change or elimination of obligations arising out of the market analysis process pursuant to the new Law.
Namely, in accordance with subsection e) of paragraph no. 2 of article 122 of Law no. 5/2004, the network access obligations, contained in paragraph no. 2 of article 6 of Decree-Law no. 415/98, of 31 December and of article 33 of ROFTS, will be maintained.
This means that the “PT ADSL Network” offer, which was already regulated within the former framework, continues to be regulated according to the current Law no. 5/2004, so an intervention by ANACOM right now is considered a course of action to be continued.
Furthermore, in the new community regulatory framework for electronic communications the wholesale supply of broadband access, including ADSL, is identified as a relevant market, that is, subject to the application of “ex ante” regulatory measures. Therefore PTC is expected to be considered an operator with significant market power in this relevant market.
Pursuant to Law no. 5/2004, art. 63, no. 2, ANACOM may, by its own initiative and at any time, and should, upon request by any of the parties, intervene in the conclusion of network access and interconnection agreements whenever deemed justified in order to guarantee an effective and sustainable competition and/or the interoperability of services, determining non-discriminatory, equitable and reasonable conditions providing the maximum benefit to end users.
As mentioned above, two operators requested ANACOM to intervene in the “PT ADSL Network” offer so as to modify it as regards the access points (referred to as “aggregation points”), since its current version only includes two such points for the whole territory. This means that all the traffic relating to end users, clients of new operators, regardless of the point of the territory they are in, has to converge necessarily to one of those 2 points – one in Lisbon and the other in Oporto – and from those points on traffic may carried in the ISP’s own infrastructures. But this path is also carried out based on PTC’s network, who is naturally remunerated for it – and the conditions under which this operation is made are comprised and are an integral part of the “PT ADSL Network” offer.
ANACOM is therefore requested to intervene with regard to the existent offer conditions to the extent that it determines the increase of the number of aggregation points provided by PTC. The consequences of this modification are clear: if an operator alternative to PTC is provided with its own infrastructure in different points of the territory, is may opt to carry out the mentioned path on its own network, with economic advantages resulting from a more efficient use of its resources.
Accordingly, on 5 February 2004, the Board of Directors of ANACOM approved the draft determination on the evolution of the “PT ADSL Network” wholesale offer and, pursuant to articles 100 and 101 of the Rules of the Administrative Procedure, notified the interested parties for them to give their opinion within 10 working days. The received comments, the respective analysis and the reasoning of the decision are contained in the “Report of the prior hearing to the interested parties about the draft determination on the evolution of the “PT ADSL Network” wholesale offer, which is included in this determination.
VIII - Decision
Within the duties foreseen in subsections b), e) and f) of art. 6 of the Statutes, approved by Decree-Law no. 309/2001, of 7 December, and taking into account the regulation objectives foreseen in art. 5 of Law no. 5/2004, of 10 February, namely to promote competition in the offer of electronic communications networks and services, to ensure that users get the maximum benefit in terms of choice, price and quality and to encourage efficient investments in infrastructures and to promote innovation, and pursuant to subsection e), of no. 2 of art. 122 of Law no. 5/2004 and subsections b) and g) of art. 9 of the Statutes, the Board of Directors of ANACOM determines as follows:
I. PTC shall submit for discussion to providers that are using the “PT ADSL Network” offer, within one month from the date of the final determination, an initial technical proposal based on the following aspects:
1. Increasing the available points of access to the ATM level;
2. Providing a detailed list of new access points (ATM switches), distinguishing namely the “Regional” and “National” levels”;
3. Establishing, for each new access level, the technical conditions that relate to the new offer, namely available physical interfaces (at least, at the level of E1 in the “Regional” level), the supported local access classes and remaining network parameters;
4. Foreseeing the provision of service categories that enable the offer of services with guaranteed data rate (CBR and VBR and, possibly, UBR+, or others);
5. Updating the respective forms and interface for the exchange of information regarding operator requests;
6. Including new offer prices (new access points, categories of service and VPs), guaranteeing the tariffs coherence upstream (ROLLU) and downstream (current offer);
7. Defining aspects related to the quality of service, namely the usual deadlines for 95% of requests/processes, applicable to the provision activities (namely, for co-installation and configuration of VPs) and repair of damages;
8. Including the conditions for the co-installation of equipment, which should be compatible with the ones currently made available within the scope of the ROLLU/RIO.
II. PTC must, within 2 months as from the date of the final determination, change the “PT ADSL Network” offer, so as to include the above-mentioned aspects.
III. During the month between the delivery of the proposal referred to in paragraph 1 and the delivery of the changed “PT ADSL Network” offer, PTC will have to analyse and incorporate, as much as possible, any contribution made by the interested parties. Contributions shall be sent to PTC within 10 working days after the reception of the proposal referred to in paragraph I.
IV. ANACOM shall follow the evolution of all market conditions and needs so as to ensure sound competition and compliance with the established regulatory principles, being entitled to intervene again within the wholesale offer.
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1 Document to be made available in ERG Internet site in http://erg.eu.int.
2 As far as this is concerned, it is relevant the understanding of the European Commission regarding compliance with the non-discrimination principle by the historic operators in their network access offers.
