UK: Review Of Local Loop Unbundling In Europe

Last Updated: 1 November 1999

INTRODUCTION

Local loop unbundling is entering into its early stages in Europe. Several European countries have already introduced local loop unbundling and others are undertaking consultations in this area. With the advent of xDSL technologies that provide high bandwidth services over the copper loop, unbundled access to the local loop presents a competitive alternative to network build, including broadband wireless. Operators in Europe are positioning themselves to bring high bandwidth services to customers as demand for these type of services takes off. This review considers the position of local loop unbundling in several of the major European countries and also at the European Union level.

COMMERCIAL OVERVIEW

In Europe local loop unbundling is still in its infancy and although some commercial offers have emerged there is no consensus amongst the various countries on this issue. There are currently four countries where commercial agreements are currently in place. These are Denmark, Finland, Germany and Sweden. The operators in two further countries (Austria and the Netherlands) have announced or are close to announcing commercial terms although no agreements are currently operating. It is general practice that these commercial offerings are on the basis of a lease of the local loops from the incumbent network operator and not an outright assignment of the copper loop. Further, a substantial proportion of the legacy incumbent operators are developing or trialing their own xDSL offerings to the public. Accordingly, there is an increasing awareness of the possibilities presented by xDSL technologies. The roll out of the technologies is anticipated to increase following the clarification of the regulatory position and the publication of suitable commercial offerings in the various European countries.

REGULATORY OVERVIEW

At present, there is no pan-European requirement for network operators to grant access to the local loop for the installation of competitor's equipment to upgrade the local loop. However, there are generic obligations imposed on European countries by legislation passed at a European Union level requiring operators with "significant market power" (SMP) (please see endnote 1) to grant "access" (particularly "special network access") to their networks. The European Commission has recently published guidance on how this European Union legislation could be used in practice to encourage operators with SMP to provide access to the local loop.(please see endnote 2)

Notwithstanding the obligations to grant access at a European level, many of the national regulatory authorities in the countries concerned have commenced public consultations on the scope and timetable for unbundling the local loop. The United Kingdom and France are consulting and are close to pronouncing a regulatory framework, whilst the regulatory authorities in Ireland, Italy and Portugal are also in the process of consulting with interested parties. In the near future it is anticipated that a detailed regulatory framework will be created in all these countries to provide access to the local loop for the installation of xDSL technologies.

EU STATUS

The European Union has been active in the area of telecommunications with the objective of establishing a common and competitive market for telecommunications services within the member states of the European Union. This has been achieved by the adoption of various legislative acts (Directives) which each Member State is required to implement and give effect to in national law. This strand of EU law, intended to create a competitive market, is known as the Open Network Provision Directives (ONP Directives). The objective of the ONP Directives is to harmonise conditions for open and efficient access to, inter alia, public telecommunications networks. Access to networks is specifically addressed under two main provisions of the ONP Directives. The provisions are not specific and are drafted in broad terms and do not specifically address the issue of access to the local loop network. The Commission's note discussed above provides guidance on the application of these provisions to access over the local loop.

Under the provisions, organisations with significant market power (generally the former incumbent) are required to meet reasonable requests from other organisations for access to the fixed public network at points other than those points commonly used for the purposes of interconnection ("special network access" or SNA). This potentially includes access to the local loop. One of the provisions outlines reasons for which such a request may be rejected, these being that technically and commercially viable alternatives are available or that the access requested is inappropriate in relation to the resources available to meet that request. As can be seen, the success of a request for access to the local loop will depend largely upon the actual circumstances prevailing within each country.

However, the Commission states in its guidance note that EU member states are free to impose unbundling obligations on operators with SMP in order to encourage competition. Such unbundling requirements are to be supplemented by regulatory measures to safeguard competition in the long term (for example by not eliminating the incentives to construct alternative networks) including provisions such as time limits and progressively increasing tariffs.

Although the above provisions do not amount to a specific obligation to provide access to the local loop, an established European operator will be able to request such special network access from operators with SMP. Where the relevant operator rejects this approach the operator could seek the intervention of the relevant national regulatory authority in order to try to enforce the above provisions.

Other relevant provisions of the ONP Directives provide that operators with SMP are not allowed to discriminate on the supply of services to other operators. Operators with SMP shall provide interconnection facilities (this could include the operator's own xDSL service) to other operators under the same conditions and of the same quality as they provide to their own service provider divisions or subsidiaries. Hence, where the local operators with SMP set up their own xDSL services they must resell that service to other operators on equivalent terms.

The ONP Directives also address the issue of co-location. National regulatory authorities are required to encourage sharing of facilities and properties. Agreements for co-location are normally a matter for commercial and technical agreement between the parties. The National Regulatory Authority may intervene to resolve disputes. There is provision for co-location to be imposed but only after a period of public consultation allowing all interested parties to give their views. As mentioned above, this process has started in several EU member states.

The European Commission commissioned a study at the end of 1998 on recommended practices for co-location and other facilities sharing for telecommunications infrastructure. The study concluded that effective co-location could be encouraged by the early establishment of the regulatory framework setting out the views of the regulator and determining the charging regime. The resultant certainty is intended to provide an environment where all parties are able to focus on practical issues. The report seeks to provide guidance in achieving the regulatory framework by identifying "General Principles" to be defined by national regulatory authorities and "Recommended Practices" to assist operators. Although the study only offers guidance at a macro level it may be a useful guide on the development of co-location policy in EU member states.

The Commission has stated that the issue of local loop unbundling may be the subject of a Commission notice or recommendation in the near future.

A general principle of EU telecommunications law that has potential to impinge upon the unbundling process is the obligation for designated operators to provide universal service. Each member state must decide how universal service is dealt with as the local access loop is unbundled. Should the designated universal service operator retain the obligation to provide the minimum prescribed services, should the obligation pass to the operator acquiring the local loop or will the customer waive its right to the minimum services?

ENDNOTES

1. Operators with significant market power are designated as such by the national regulatory authority. Organisations with 25 % or more of the relevant market in a given geographical area are presumed to have SMP. Notwithstanding the presumption the national regulatory authority retains a discretion whether or not to designate an operator as having SMP.

2. ONPCOM 99-33 "Access to fixed and mobile network infrastructures owned by operators designated as having significant market power"

The content of this article is intended to provide general information on the subject matter and is not a legal advice. An individual matter requires legal advice according to the specific circumstances.

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