Croatian Post and Electronic Communications Agency
Jurišićeva 13
10000 Zagreb
July 2009
MARKET ANALYSIS OF WHOLESALE
(PHYSICAL) NETWORK
INFRASTRUCTURE ACCESS
(INCLUDING SHARED OR FULLY
UNBUNDLED ACCESS) AT A FIXED
LOCATION
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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1. Executive Summary .....................................................................................................4
2. Introduction .................................................................................................................6 2.1. European Regulatory Framework for Electronic Communications ..............................6
2.2. Electronic Communications Act..................................................................................7
2.3. Chronology of activities..............................................................................................9
3. Identification of the Relevant Market.......................................................................11
4. Definition of a Relevant Market................................................................................12 4.1. Relevant market in the dimension of services............................................................12
4.1.1. Retail market of broadband Internet access ....................................................13
4.1.2. Demand-side substitution- retail level ............................................................13
4.1.2.1. xDSL access over twisted-pair copper wire ...........................................14
4.1.2.1.1 ADSL access over twisted-pair copper wire .........................................14
4.1.2.1.1 VDSL access over twisted-pair copper wire .........................................17
4.1.2.2. Access over mobile networks ................................................................18
4.1.2.3. Fixed wireless access.............................................................................21
4.1.2.3.1 Fixed wireless access over the Homebox service..................................21
4.1.2.3.2 Fixed wireless access over the WiMAX technology.............................22
4.1.2.3.3 Fixed wireless access over the HotSpot service....................................23
4.1.2.4. Access over cable networks ...................................................................23
4.1.2.5. Access over leased lines ........................................................................25
4.1.2.6. Access over optical fibre .......................................................................25
4.1.2.7. Conclusion ............................................................................................26
4.1.3. Demand-side substitution – wholesale level ...................................................26
4.1.3.1. Service of unbundled access to the local loop based on advanced
technical solutions in the access network as a substitute service for the
service of unbundled access to the copper-based local loop ...................28
4.1.3.1.1 Service of unbundled access to the local loop based on FttCab solution29
4.1.3.1.2 Service of unbundled access to the local loop based on FttH solution...31
4.1.3.2. Bitstream service as a substitute service for the service of unbundled
access to the local loop ..........................................................................34
4.1.3.3. Building own infrastructure as a substitute service for the service of
unbundled access to the local loop.........................................................36
4.1.3.4. Broadband Internet access service for self-supply as a substitute service
for the service of unbundled access to the local loop..............................36
4.1.4. Supply-side substitution.................................................................................38
4.1.5. Collocation service ........................................................................................38
4.1.6. Conclusion on the relevant market in the dimension of services.....................39
4.2. Relevant market in the geographical dimension.........................................................40
4.3. Opinion of the competent regulatory authority on the definition of the relevant market
.................................................................................................................................40
5. Objective and Subject of Market Analysis ...............................................................41 5.1. Market share of an operator on the relevant market ...................................................41
5.2. Control of infrastructure in case of significant problems for infrastructure competition
.................................................................................................................................43
5.3. Economies of scale ...................................................................................................44
5.4. Economies of scope ..................................................................................................44
5.5. Lack of countervailing buying power ........................................................................45
5.6. Level of vertical integration ......................................................................................45
5.7. Conclusion on the assessment of the existence of operators with significant market
power and the evaluation of effectiveness of competition .........................................46
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6. Competition Problems ...............................................................................................47 6.1. Market dimension of competition problems ..............................................................48
6.1.1. Vertical leveraging ........................................................................................48
6.1.2. Horizontal leveraging ....................................................................................48
6.1.3. Single market dominance...............................................................................49
6.1.4. Call termination.............................................................................................49
6.2. Cause-and-effect type of dimension of competition problems....................................49
6.3. Overview of competition problems recognised in the European practice ...................50
6.4. Competition problems on the market of wholesale network infrastructure access
(including shared or fully unbundled access) at a fixed location................................51
6.4.1. Refusal to deal/denial of access......................................................................52
6.4.2. Leveraging by means of non-price variables ..................................................54
6.4.2.1. Discriminatory use or withholding of information .................................54
6.4.2.2. Delaying tactics.....................................................................................54
6.4.2.3. Undue requirements ..............................................................................55
6.4.2.4. Undue use of information about competitors..........................................56
6.4.2.5. Quality discrimination ...........................................................................56
6.4.2.6. Other types of discrimination currently defined in the Annex to the
Reference Offer for the service of unbundled access to the local loop....57
6.4.3. Leveraging by means of pricing.....................................................................57
6.4.3.1. Price discrimination...............................................................................57
6.4.3.2. Cross subsidisation ................................................................................59
7. Regulatory Obligations of the SMP Operator ..........................................................60 7.1. Regulatory obligations imposed on the SMP operator on the market of wholesale
(physical) network infrastructure access (including shared or fully unbundled access)
at a fixed location .....................................................................................................60
7.1.1. Obligation of access to, and use of, specific network facilities .......................61
7.1.2. Obligation of non-discrimination ...................................................................73
7.1.3. Obligation of transparency.............................................................................75
7.1.4. Price control and cost accounting obligation ..................................................81
7.1.5. Obligation of accounting separation...............................................................92
7.1.6. Other regulatory obligations that might be imposed by the Agency on the
market of wholesale (physical) network infrastructure access (including shared
or fully unbundled access) at a fixed location, pursuant to ECA.....................95
8. Annexes ...........................................................................................................................96 8.1 . Annex A – Opinion of the Croatian Competition Agency........................................96
8.2 Annex B – Comments on the market of wholesale (physical) network infrastructure
access (including shared or fully unbundled access) at a fixed location and the
Agency’s reply to the delivered comments................................................................98
8.2.1 Answers to comments made by HT-Hrvatske telekomunikacije d.d. ..............98
8.2.2 Answers to VIPnet’s comments ...................................................................131
8.2.3 Answers to comments made by H1 Telekom ...............................................136
8.2.4 Answers to comments made by OT-Optima Telekom ..................................143
8.2.5 The Agency’s comments..............................................................................150
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1. Executive Summary
The European directives have been implemented into Croatian legislation through the
Electronic Communications Act1 which entered into force on 1 July 2008. The Electronic
Communications Act, among other things, lays down conditions for the provision of
electronic communications networks and services. Through the application of the provisions
of this Act, the Agency2 creates conditions for efficient competition, that is, it allows all
operators active in electronic communications markets to do their business under equal
conditions.
While carrying out the market analysis procedure provided for in Article 52 of the ECA, the
Agency paid particular attention to apply the relevant European Commission
Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation3 and the relevant
European Commission guidelines on market analysis and assessment of significant market
power under the Community regulatory framework for electronic communications networks
and services4.
The main objective of the market analysis procedure is to establish the existence of efficient
competition in a certain market or whether there are one or more operators on that market
with single or joint significant market power. The results of the analysis will serve to impose,
alter, maintain or withdraw regulatory obligations laid down in Article 58 to 65 of the ECA.
Pursuant to Article 53, paragraph 1 of the ECA, the Agency has established the market of
wholesale (physical) network infrastructure access (including shared or fully unbundled
access) at a fixed location as a relevant market susceptible to ex-ante regulation. The
mentioned market is a part of the relevant European Commission Recommendation on
Relevant Markets Susceptible to Ex-Ante Regulation, which means that the European
Commission concluded that the three criteria referred to in Article 53, paragraph 2 of the ECA
have been cumulatively met in the relevant market.
The identification of the relevant market is a basis for market analysis which consists of the
definition of the relevant market and the assessment of the existence of one or more operators
with significant market power on this market followed by the imposition of regulatory
obligations on operators with significant market power.
The purpose of the process of the definition of a relevant market is to identify restrictions, that
is, problems faced by electronic communications networks operators on a certain market. In
the process of the definition of a relevant market, that is, of market boundaries, the Agency
has defined the dimension of services and the geographical dimension of the relevant market
and on the basis of the results of the conducted analysis it identified the above-mentioned
relevant market.
On the basis of the conducted analysis, the Agency has concluded that the relevant wholesale
broadband access market comprises the following:
1 Electronic Communications Act (OG 73/08)
2 Croatian Post and Electronic Communications Agency (HAKOM) 3 OJ L 344/65; 28 December 2007
4 OJ C 165/6; 11/7/ 2002
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On the basis of the conducted analysis, the Agency has concluded that the relevant wholesale
(physical) network infrastructure access (including shared or fully unbundled access) at a
fixed location comprises the following services:
• Service of fully unbundled access to the copper-based local loop and the copper-based local sub-loop which enables the operator to use the entire frequency spectrum
of the local loop,
• Service of shared unbundled access to the copper-based local loop and the copper-based local sub-loop enables the operator to use only the non-voice band of
the frequency spectrum of the unbundled local loop or the local sub-loop (twisted
copper pair), while the voice band of frequency spectrum of the local loop or the local
sub-loop is still used by HT to provide publicly available telephone service,
• Service of unbundled access to the fibre local loop by means of point to point link,
• Service of access to network infrastructure provided by HT for self-supply regardless of whether access technology is based on twisted copper pair, a hybrid
solution including both twisted copper pair and optical fibre, or on the basis of optical
fibre;
• Collocation service, which includes physical, distant and virtual location.
The Agency has also determined that the relevant market of wholesale (physical) network
infrastructure access (including shared or fully unbundled access) at a fixed location in the
geographical dimension is the national territory of the Republic of Croatia.
After having identified the relevant market, the Agency has, on the basis of criteria necessary
for the assessment of significant market power of operators as laid down in Article 55,
paragraph 5 of the ECA, established the following:
• HT d.d. is an operator with significant market power on the market of wholesale
(physical) network infrastructure access (including shared or fully unbundled access)
at a fixed location.
After having identified HT as the operator with significant market power, the Agency has
imposed on HT as the SMP operator the following regulatory obligations in view of problems
that may appear in the market of wholesale (physical) network infrastructure access
(including shared or fully unbundled access) at a fixed location and in the downstream retail
market onto which the operator with significant market power may leverage its significant
market power:
• Obligation of access to, and use of, specific network facilities;
• Obligation of non-discrimination;
• Obligation of transparency and the obligation to publish the reference offer for the
service of unbundled access to the local loop and related facilities;
• Price control and cost-accounting obligations;
• Obligation of accounting separation.
Pursuant to Article 54, paragraph 5 of the ECA, the Agency asked for an opinion of the
Croatian Competition Agency on the manner in which the Agency has defined the relevant
market and designated the operator with significant market power on that market. The opinion
is enclosed to this document in Chapter 8.1 “Annex A” of this document.
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2. Introduction
2.1. European Regulatory Framework for Electronic Communications
In March 2002, the European Commission adopted four directives representing the 2002
Regulatory Framework for Electronic Communications Networks and Services, and the fifth
directive, which also represents the Regulatory Framework, was adopted in October 2002.
The previously mentioned directives are the following:
• Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002
on access to, and interconnection of, electronic communications networks and
associated facilities (Access Directive)
• Directive 2002/20/EC of the European Parliament and of the Council of 7 March
2002 on the authorisation of electronic communications networks and services
(Authorisation Directive)
• Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002
on a common regulatory framework for electronic communications networks and
services (Framework Directive)
• Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002
on universal service and users' rights relating to electronic communications networks
and services (Universal Service Directive)
• Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002
concerning the processing of personal data and the protection of privacy in the
electronic communications sector (Directive on privacy and electronic
communications)
The intention of the European Commission directives is to promote harmonisation in the field
of electronic communications in all Member States of the European Union.
On the basis of the first paragraph of Article 15 of the Framework Directive (Directive
2002/21/EC), the European Commission adopted the following:
• Recommendation 2003/311/EC of 11 February 2003 on relevant product and service
markets within the electronic communications sector susceptible to ex ante
regulation5, which was in force until December 2007 when it was replaced by
• Recommendation 2007/879/EC of 17 December 2007 on relevant product and service
markets within the electronic communications sector susceptible to ex ante regulation.
The relevant Recommendation from February 2003 recognised 18 markets susceptible to ex
ante regulation meaning that the European Commission concluded that three criteria were
cumulatively met in the relevant markets (The Three Criteria Test), and it thus concluded that
the relevant markets were susceptible to ex-ante regulation in the majority of the European
5 OJ L 114/45; 08/05/ 2003
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Union Member States. The previous Recommendation on relevant markets was amended in
such a manner that the new Recommendation on relevant markets recognises 7 relevant
markets susceptible to ex ante regulation instead of the previous 18. Markets which are no
longer a constituent part of the Recommendation on relevant markets may still be regulated
by national regulatory authorities provided that they prove that the three criteria have been
cumulatively met on these markets (The Three Criteria Test).
The intention of the Recommendation on relevant markets is to promote harmonisation in the
electronic communications sector by making equivalent products and services subject to
market analysis in all Member States of the European Union. However, national regulatory
authorities of Member States are authorised to determine on their own that certain markets,
different from those on the list of markets in the valid Recommendation, are susceptible to ex
ante regulation, depending on the situation in each individual country provided that they
prove that three criteria have been cumulatively met in these markets (The Three Criteria
Test).
2.2. Electronic Communications Act
The previously mentioned directives have been implemented into Croatian legislation through
the ECA which, among other things, lays down the conditions for the provision of electronic
communications networks and services. By applying the provisions of ECA, the Agency
ensures conditions for efficient competition, that is, it allows all operators active in electronic
communications markets to operate under equal conditions.
While carrying out the market analysis procedure provided for in Article 52 of the ECA, the
Agency paid particular attention to apply the relevant European Commission
Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation and the relevant
European Commission guidelines on market analysis and assessment of significant market
power under the Community regulatory framework for electronic communications networks
and services.
The main objective of the market analysis procedure is to establish the existence of efficient
competition in a certain market or whether there are one or more operators on that market
having single or joint significant market power. The results of the analysis or the Three
Criteria Test will serve to impose, alter, maintain or withdraw regulatory obligations laid
down in Articles 58 to 65 of the ECA.
The 2002 Regulatory Framework which has been implemented in the European Union
Member States and in Croatian legislation through the ECA, provides for a three-step market
analysis procedure:
1. The first step refers to the process of identification of relevant markets susceptible to ex
ante regulation pursuant to Article 53 of the ECA.
Pursuant to the first paragraph of Article 15 of the Framework Directive (Directive
2002/21/EC), the European Commission adopted Recommendation 2003/311/EC of 11
February 2003 on relevant product and service markets within the electronic
communications sector susceptible to ex ante regulation. The mentioned relevant
Recommendation recognised 18 markets susceptible to ex ante regulation meaning that
the European Commission concluded that three criteria were cumulatively met on the
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relevant markets (The Three Criteria Test), and it thus concluded that the relevant markets
were susceptible to ex-ante regulation in the majority of the European Union Member
States.
On the basis of the new Recommendation of 17 December 2007 on relevant products and
service markets within the electronic communications sector susceptible to ex ante
regulation, the previous Recommendation was amended in such a manner instead of 18 it
recognises 7 relevant markets susceptible to ex ante regulation. Markets which are no
longer a constituent part of the Recommendation on relevant markets may still be
regulated by national regulatory authorities provided that they prove that the three criteria
have been cumulatively met in these markets (The Three Criteria Test).
The Electronic Communications Act entered into force in the Republic of Croatia on 1
July 2008, and Article 52, paragraph 4 of the ECA reads that the Agency shall, when
carrying out the procedures for identification of relevant markets susceptible to ex ante
regulation, take particular account of the application of the relevant Commission’s
Recommendation on relevant markets. Since the relevant Recommendation on relevant
markets in force is the one which entered into force on 28 December 2007 and which
recognises 7 markets susceptible to ex-ante regulation, the Agency may, without proving
the cumulative satisfaction of the three criteria (the Three Criteria Test), carry out ex ante
regulation only in these 7 markets.
At the same time, in accordance with Article 53, paragraph 2 of the ECA, the Agency may
adopt a decision establishing that other relevant markets, in addition to relevant markets
referred to in the European Commission recommendation, are susceptible to ex ante
regulation provided that the following three criteria have been cumulatively met in these
markets:
1. the presence of high and non-transitory market entry barriers of structural, legal or
regulatory nature;
2. market structure which does not aim towards the development of effective competition
within a certain time framework;
3. the application of relevant competition legislation alone does not make possible the
elimination of market entry failures concerned.
However, if all three criteria referred to in Article 53, paragraph 2 of the ECA have been
cumulatively satisfied, the Agency may carry out ex ante regulation of the remaining 11
markets that formed a constituent part of the old Recommendation on relevant markets.
The Agency also may also, provided that all three criteria referred to in Article 53,
paragraph 2 of the ECA have been cumulatively satisfied, regulate markets following
from the Telecommunications Act6 or any other markets which are specific for the
electronic communications networks and services sector in the Republic of Croatia but do
not follow from the old Recommendation on relevant markets or the Telecommunications
Act.
The market of „Wholesale (physical) network infrastructure access (including shared or
fully unbundled access) at a fixed location“, which is the subject of this document, was
6 The Telecommunications Act which was in force in the Republic of Croatia until 1 July 2008, and was based
on the 1998 Regulatory Framework. The mentioned Act recognised 4 relevant markets: interconnection market,
leased-lines market, fixed public telephone networks services market and market of public voice service in
mobile telecommunications networks.
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the 11th
of the 18 relevant markets mentioned in the old Recommendation on relevant
markets. In the new Recommendation on relevant markets the market in question in the 4th
of the 7 relevant markets mentioned in this Recommendation. In accordance with the
above, this market is still susceptible to ex ante regulation and the Agency may carry out
ex ante regulation of this market and thus identify the relevant market in question without
proving that the three criteria referred to in Article 53, paragraph 2 of the ECA have been
cumulatively met.
2. In the second step the Agency carries out a market analysis consisting of the definition
of the relevant market and the assessment of the existence of a single or multiple
operators with significant market power on that relevant market in order to assess the
effectiveness of competition on that relevant market pursuant to Article 54 of the ECA and
Article 55 of the ECA.
In order to establish the relevant market pursuant to Article 54 of the ECA, the Agency
shall determine the dimension of services and the geographical market dimension taking
into account the relevant European Commission Guidelines on market analysis and the
assessment of significant market power under the Community regulatory framework for
electronic communications networks and services and the relevant European Union acquis
communautaire in the competition protection sector.
After having identified the relevant market, the Agency shall, in cooperation with the
Croatian Competition Agency, asses the effectiveness of competition on that market.
After having assessed the efficiency of competition in this market, the Agency will, if
there is no effective competition and pursuant to Article 55 of the ECA, assess whether
there is, on this market, an operator with significant market power or operators with
significant market power.
If, on the basis of market analysis, the Agency establishes that there is no effective
competition on the relevant market, it shall, as part of the third step, adopt a decision
pursuant to Article 56 of the ECA on the designation of operators with significant market
power on that relevant market. By this decision the Agency will impose at least one
regulatory obligation referred to in Articles 58 to 65 of the ECA to every operator.
2.3. Chronology of activities
After the entry into force of the ECA on 1 July 2008, the Agency’s Council, on its session
held on 9 July 2008 adopted a decision7 determining operators who are obliged to submit all
data necessary for the definition and analysis of the market of wholesale (physical) network
infrastructure access (including shared or fully unbundled access) at a fixed location.
In the above-mentioned decision, the Agency’s Council determined that the following
operator is obliged to submit all necessary data:
• HT-Hrvatske telekomunikacije d.d., Savska cesta 32, 10000 Zagreb
7 Class: UP/I-344-01/08-01/1584; Reg. No. 376-11-08-01
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In order to collect all the necessary data, the Agency prepared, on the basis of its own
assumptions and experiences from European Union Member States, a special questionnaire
for the market of wholesale (physical) network infrastructure access (including shared or fully
unbundled access) at a fixed location. The Agency prepared the questionnaire in such a
manner that it tried to cover all the peculiarities of the market in question while also taking
into account the best European practice. In order to get a quality questionnaire, the Agency
included HT in the preparation of the questionnaire at the meeting held on 3 July 2008. Data
requested in the above-mentioned questionnaire refer to the time period comprising the
second half of 2005, the whole of 2006 and 2007, and the first half of 2008.
In accordance with the decision of the Agency’s Council of 9 July 2008, the Agency sent the
questionnaire to HT on 16 July 2008. HT was asked to complete and return the questionnaire
to the Agency, both in written and electronic form, by 19 September 2008. HT returned the
completed questionnaire on 6 October 2008 after having asked the extension of the deadline
by an official letter of 18 September 2008.
Upon receipt of the questionnaire, the Agency initiated a detailed analysis of the relevant
market of wholesale (physical) network infrastructure access (including shared or fully
unbundled access) at a fixed location. Furthermore, after the receipt and the analysis of the
submitted data, bearing in mind the importance of the initiated procedure, and in order to
eliminate all possible ambiguities related to the submitted data, the Agency sent a memo on
13 November 20088 asking HT for additional clarifications and/or data which have not been
submitted but are important for further analysis of the relevant market. The set deadline was
28 November 2008.
The Agency took into account the delivered additional clarifications and/or data which had
not been delivered before and continued with the detailed analysis of the relevant market of
wholesale (physical) network infrastructure access (including shared or fully unbundled
access) at a fixed location.
For the purposes of analysis of this relevant market, the Agency also used data from the
questionnaire for broadband Internet access market.
8 Class: UP/I-344-01/08-01/1585; Reg.No: 376-11-08-25
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3. Identification of the Relevant Market
The Croatian Post and Electronic Communications Agency is a national regulatory agency
carrying out regulatory and other tasks within the scope and competences laid down in the
Electronic Communications Act. Among other things, the Agency is competent for
competition in electronic communications, and, pursuant to Article 53, paragraphs 1 and 2 of
the ECA it adopts a decision identifying relevant markets susceptible to ex ante regulation.
On the basis of Article 53, paragraph 1 of the ECA, the Agency identifies relevant markets
susceptible to ex ante regulation while taking into account the relevant European Commission
Recommendation mentioned in Article 54, paragraph 4 of the ECA.
At the same time, in accordance with Article 53, paragraph 2 of the ECA, the Agency may
adopt a decision establishing that other relevant markets, in addition to relevant markets
referred to in the European Commission Recommendation, are susceptible to ex ante
regulation provided that the following three criteria have been cumulatively met in these
markets:
1. the presence of high and non-transitory market entry barriers of structural, legal or
regulatory nature;
2. market structure which does not aim towards the development of effective competition
within a certain time framework;
3. the application of relevant competition legislation alone does not make possible the
elimination of market entry failures concerned.
Pursuant to Article 53, paragraph 1 of the ECA, the Agency’s Council adopted a decision 9
identifying a relevant market of:
• Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location
10.
The mentioned market is a part of the recommendation in force, which means that the
European Commission concluded that the mentioned three criteria have been cumulatively
satisfied in the relevant market and thus established that the relevant market is susceptible to
ex ante regulation in the majority of EU Member States.
The identification of the relevant market is a basis for market analysis which consists in the
definition of the relevant market, the assessment of the existence of single or multiple
operators with significant market power in that market and the imposition of regulatory
obligations on SMP operators, which is described in detail in the following chapters.
9 Decision on relevant markets susceptible to ex ante regulation (Class: UP/I-344-01/08-01/1582; Reg. No: 376-
11-08-01) 10
Market No. 4 from the Annex to the European Commission Recommendation on relevant markets susceptible
to ex ante regulation
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4. Definition of a Relevant Market
In order to define a relevant market, the Agency determines a dimension of services and a
geographical dimension of the relevant market taking into account the relevant European
Commission Guidelines on market analysis and the assessment of significant market power
and the relevant acquis communautaire in the competition sector.
According to the European Commission Guidelines, the assessment of behaviour of operators
on the market requires the taking into account of demand-side substitution and supply-side
substitution. In addition to the mentioned competition problems, it is necessary to assess the
existence of potential competition as well. The difference between potential competition and
supply-side substitution lies in the fact that supply-side substitution responds promptly to a
price increase whereas potential competitors may need more time before starting to supply the
market with the equivalent service. Furthermore, supply substitution involves no additional
significant costs whereas potential entry occurs at significant sunk costs11
.
Demand-side substitutability is used to establish services which are regarded as substitutes by
consumers whereas supply-side substitutability indicates the readiness of suppliers in the
immediate to short term offer the equivalent service without incurring significant additional
costs.
One possible way of assessing the existence of any demand and supply-side substitution is to
apply the so-called ‘hypothetical monopolist test12
. This test is used to study what would
happen in case of a small but significant, lasting increase in the price of a given product or
service, assuming that the prices of all other products or services remain constant whereby a
permanent price increase of between 5 and 10% is taken into account.
4.1. Relevant market in the dimension of services
Neither the Recommendation which is now in force nor the former one recognised the retail
broadband Internet market as a market susceptible to ex ante regulation. The European
Commission feels that efficient regulation at wholesale level may ensure competition at the
retail level.
However, since the demand for the service of wholesale (physical) network infrastructure
access (including shared or fully unbundled access) at a fixed location the Agency believed it
would be appropriate when determining the dimension of services of the relevant market of
wholesale (physical) network infrastructure access (including shared or fully unbundled
access) at a fixed location to define substitute services at the wholesale market by studying the
ways in which operators at the retail market provide the service of broadband internet access
to end users whilst taking into account future market development
.
For the purpose of providing broadband Internet access services at the retail level, operators
either have their own infrastructure or use wholesale services of other operators to ensure
access to the end user.
11
eng. sunk costs 12
SSNIP test – eng. small but significant non transitory increase in price
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4.1.1. Retail market of broadband Internet access
According to the data collected in questionnaires in which, for the purposes of this analysis,
speed over144 kbit/s13
is regarded as broadband access speed, the end user in the Republic of
Croatia has access to broadband Internet in the following ways:
• xDSL access over a twisted-pair copper wire14
,
• access over mobile networks (EDGE, UMTS, HSDPA),
• fixed wireless access (Homebox, WiMAX, Wi-Fi Hot-Spots),
• cable networks access (CTV),
• access over leased-lines (different from xDSL access over twisted-pair copper wire,
fixed wireless access and optical fibres, and
• access over optical fibre (FttH).
Figure 1 End-users of broadband Internet access services according to way of access
Source: Questionnaires for wholesale broadband access market
According to the submitted data, ADSL access over twisted pair copper wire15
is a broadband
Internet access service with the greatest penetration and the share of 77.93%. It is followed by
access over mobile networks, fixed wireless access, and broadband Internet access over cable
networks, with the share of other technologies amounting to around 1% (Figure1).
4.1.2. Demand-side substitution- retail level
13
In accordance with the definition of the Communication Committee– a committee assisting European
Commission in the execution of its authorities on the basis of the 2002 Regulatory Framework 14 ADSL, ADSL2, ADSL2+, VDSL, VDSL2 15
For the purposes of this document, unless specified otherwise, ADSL access over twisted pair copper wire
shall mean access based on ADSL, ADSL2 and ADSL2+ technologies.
77.93%
14.66%
2.70% 1.11% 3.60%
ADSL access over copper wire Access over mobile networks
Fixed wireless access Cable access
Other technologies
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
14
Demand-side substitution implies the determination of services regarded by users as substitute
services. The Agency is of the opinion that the starting point for the establishment of services
that may be regarded as substitute services should be the service with greatest penetration.
Since services with the greatest penetration at the retail level of broadband Internet access are
services based on ADSL access over twisted-pair copper wire, the Agency aims at
determining whether there are at the retail level any services that could substitute ADSL
access over twisted-pair copper wire. Substitute services are those services to which
consumers could easily switch in case of a hypothetical price increase and thus satisfy their
equivalent need.
4.1.2.1. xDSL access over twisted-pair copper wire
4.1.2.1.1 ADSL access over twisted-pair copper wire
ADSL access over twisted-pair copper wire makes possible the downstream data transfer at a
higher speed and upstream data transfer at a lower speed, and it is adequate for high-speed
data transfer and access to related facilities whereby the transfer speed depends on the length
and type of the twisted- pair. ADSL technology at the retail level is more adequate for the use
of Internet and multimedia services requiring more speed towards the user and less speed in
the other direction.
The majority of twisted copper pairs in the Republic of Croatia are owned by the HT, which is
the incumbent and the owner of the public electronic communications network with
1.735.38616
active twisted copper pairs. The geographical accessibility/distribution is very
wide due to the fact that HT, as the universal service operator, must provide access to its
network to all users17
. HT’s access network was built during a long period of time while HT
was a public undertaking and a part of HPT18
and later while it enjoyed exclusive rights to this
network.
Broadband Internet access services based on ADSL access over twisted-pair copper wire are
supplied to end users by other operators as well, in the first place through HT’s wholesale
services in which case twisted-pair copper wire remains in HT’s ownership. The number of
users to whom they provide broadband Internet access via ADSL technology by means of
direct connection to their own network is negligible.
HT’s wholesale services used by other operators to provide broadband Internet access
services to its end users are the service of unbundled access to the local loop on one hand, and
on the other, the ADSL transport service and bitstream19
access.
What follows from the above-mentioned is that those end users in the Republic of Croatia
who access broadband Internet by means of ADSL access over twisted-pair copper wire may
be the users of the following:
16
Out of the total of 3,613,213 twisted-pairs in the access network. 17
In those parts of the republic of Croatia where there is no access infrastructure via twisted-pair copper wire,
the access to universal service is provided via fixed wireless access. (FGSM). 18
Croatian Post and Telecommunications 19
A service for which the operator uses the ADSL access service along with the ADSL transport service.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
15
• Other operators by means of the service of unbundled access to the local loop,
• Other operators by means of ADSL transport service, that is, the bitstream access
service, and
• Other operators by means of direct connection to that operator’s network20
.
Figure 2 End-users of broadband Internet access by means of ADSL access over twisted-pair copper wire
according to way of access
Source: Questionnaires for wholesale broadband access market
The majority of end users who access broadband Internet by means of ADSL access over
twisted-pair copper wire, namely 85.51% of them, are HT’s users (Figure 2).
During the time period covered by questionnaires HT offered in its tariff packages three
classes of access speeds among which the one with greatest penetration is the basic access
speed of 2 Mbit/s (Figure 3). A monthly fee for the basic download access speed in the entire
time period amounted to HRK 79.00 (excluding VAT).
20
In that case twisted-pair copper wire is not owned by HT.
86.51%
10.08% 0.17%3.24%
ADSL for self-supply - HTADSL via unbundled access to the local loopADSL transport and bitstreamADSL for self-supply - othersi
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
16
Figure 3 Classification of HT’s end users depending on access speed included in the tariff package
Source: Questionnaire for wholesale broadband access market –HT
Along with every access speed, HT offers to the end user a certain amount of traffic, that is,
data transfer. During the entire time period covered by questionnaires, HT offered the basic
data traffic package including 1 GB of traffic and unlimited traffic package, while the amount
of traffic included in the Super package changed over time21
. Table 1 shows the overview of
monthly fees for traffic within tariff packages currently offered by HT:
Table 1 Monthly fee for traffic within HT’s tariff packages
Name of package Price in HRK (VAT included)
MAXadsl Start 1GB 20.00
MAXadsl Super 59.00
Flat 99.00
Source: Questionnaire for wholesale broadband access market –HT
As it may be seen from Figure 4, HT’s end users most frequently use basic packages which
include 1 GB of traffic. However, with the increase in the selection of contents and needs of
end users and a reduction in the amount of the monthly fee for unlimited tariff packages,
together with the unaltered monthly fee for basic packages, in the last three time periods
covered by questionnaires the share of end users of the basic package has decreased with a
consequential increase in the share of users of unlimited tariff packages.
21
Super package included 2GB until 2006/2, 5 GB until 2008/1, and 10 GB in 2008/1.
90.58%
9.42%
92.49%
7.51%
94.32%
5.68%
95.10%
4.90%
95.56%
4.44%
95.91%
4.09%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005/2 2006/1 2006/2 2007/1 2007/2 2008/1
Other speed
Basic speed
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
17
Figure 4 Classification of HT’s end users depending on the traffic included in the tariff package
Source: Questionnaires for wholesale broadband access market
Note: * Start package includes 1GB of traffic.
** Super package included 2 GB until 2006/2, 5 GB until 2008/1 5 GB, and 10 GB in 2008/1.
In addition to the ADSL access over twisted-pair copper wire, HT also offers the service of
interactive television called MAXtv, which had 92,205 users at the end of the third quarter
of22
of 2008.
.
4.1.2.1.1 VDSL access over twisted-pair copper wire23
The increase in the selection of contents requiring broadband Internet access and the
increasing demand for the service of IP television led to the increase in the need of users for
more capacity, i.e. faster transfer speed of broadband Internet access. For that reason, ADSL
access over twisted-pair copper wire might prove to be insufifcient in situations requiring
simultaneous transmission of voice telephony, interactive video and high-speed data services
between end users and the main distribution frame.
By shortening the twisted copper pair, i.e., the cable with twisted pairs, in the manner that it is
replaced by an optical cable from the MDF to street cabinets or other concentration point in
the fixed electronic communications network and by installing DSLAM24
(Digital subscriber
line access multiplexer) in the street cabinet or some other concentration point, an operator
uses VDSL technology, in particular VDSL225
technology, to offer to end users quicker
22
T-HT- Results of the first nine months of 2008. 23
For the purposes of this document, unless indicated otherwise, DSL access over twisted-pair copper wire shall
include access on the basis of VDSL and VDSL2 technologies. 24 Digital subscriber line access multiplexer 25
VDSL2 is a symmetrical transfer technology supporting transfer speed from the theoretical 100 Mbit/s in both
directions, depending on the length and quality of the twisted-pair copper wire
79.87%
9.10%
11.03%
86.39%
9.88%
3.74%
79,42%
13.47%
7.10%
79.57%
13.60%
6.82%
77.87%
12.48%
9.65%
72.33%
15.11%
12.56%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005/2 2006/1 2006/2 2007/1 2007/2 2008/1
MAXadsl Flat
MAXadsl Super **
MAXadsl Start*
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
18
transfer of data at shorter distances compared to data transfer based on ADSL technology.
VDSL2 was in the first place intended for the transfer of multi-channel HDTV (High
Definition Television), video on demand and videoconferences, and for Voice over the
Internet Protocol (VoIP). Therefore, VDSL2 is a good solution for triple play services26
.
Moreover, the Agency thinks that VDSL access over twisted-pair copper wire represents an
adequate substitute service for ADSL access over twisted-pair copper wire, that is, that the
users are likely, in case of a hypothetical increase in the price of the service based on ADSL
technology, to substitute this service with the service based on VDSL technology. In other
words, services based on VDSL technology will be substitutable with the already existing
services based on ADSL technology because this would satisfy the need of users for more
quality, faster and innovative services.
Consequently, the Agency believes that broadband Internet access services based on VDSL
access over twisted-pair copper wire will have a significant influence on competition at the
retail level. In other words, the mentioned services will be substitutable with broadband
Internet access services based on ADSL access over twisted-pair copper wire because this
would satisfy the need of users for more quality, faster and innovative services.
.
As a result, in the part of the analysis referring to wholesale demand-side substitution, the
Agency will take into account the influence of new generation access networks on the existing
wholesale services or, in this case, on the regulated wholesale service of unbundled access to
the local sub-loop over twisted-pair copper wire.
4.1.2.2. Access over mobile networks
Broadband Internet access over mobile networks has become the manner of Internet access
with greatest penetration after ADSL access over twisted-pair copper wire with a share of
14.66%.
The end user connects to the Internet via mobile networks by using a data card or a data
modem. The primary feature of broadband Internet access over mobile networks, which is
based on EDGE, UMTS and HSDPA technologies, is that the user is not exclusively tied to a
certain fixed location but may access Internet on his mobile phone or laptop from any
location, depending on the geographical coverage with EDGE, UMTS, or HSDPA signal.
EDGE technology makes possible the transfer of data up to 220 kbit/s, and UMTS technology
up to 384 kbit/s, which is significantly lower than access speeds offered by ADSL access over
twisted-pair copper wire. On the other hand, HDSPA technology allows transfer of data from
1.8 to 3.6 Mbit/s27
, which makes it comparable to ADSL Internet access technology in terms
of access speed. However, the speed with which the user accesses Internet via mobile
networks depends on the quality of signal reception (level or reception signal), that is, on the
closeness of the base station of the mobile operator and the number of users who are
accessing Internet at the same time, which may result in lower access speed and poorer
quality of service. In the usage of broadband data transfer via mobile technologies voice has
absolute priority over other services. This means that in case of network overload with voice
26
A service comprising broadband Internet access, IP television, and VoIP. 27
Theoretically up to 7,2 Mbit/s.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
19
calls (voice traffic), the fall in access speed is inevitable. Another restrictive factor in
broadband Internet access over mobile networks is population coverage with HSDPA signal
which amounts to 60% for all mobile network operators. It is therefore not possible in the
entire territory of the Republic of Croatia to achieve access over mobile networks at access
speed supported by HSDPA technology, which is comparable to access speed supported by
ADSL technology.
Because of the feature of mobility, the user is prepared to pay a higher price for the service of
broadband Internet access over mobile networks. More precisely, the monthly fee in mobile
tariff packages including 1GB of traffic 1 GB28
ranges from HRK 125.00 to 200,00 (see table
2), while the monthly fee for the equivalent tariff packages for ADSL access over twisted –
pair copper wire amounts to HRK 99.0029
.
Table 1 Internet access over mobile networks
Operator Name of package Price in HRK
(VAT included)
T-Mobile Mobile Internet 500 MB 100.00
T-Mobile Mobile Internet 1 GB 200.00
T-Mobile Mobile Internet 3 GB 300.00
VIP net Mobile Broadband 512 GB 91.00
VIP net Mobile Broadband 1 GB 191.00
VIP net Mobile Broadband 3 GB 291.00
VIP net Mobile Broadband Flat * 391.00
Tele2 Mobile Broadband 0 MB ** 0.00
Tele2 Mobile Broadband 500 MB 65.00
Tele2 Mobile Broadband 1 GB 125.00
Tele2 Mobile Broadband 3 GB 195.00
Table 2 Internet access over mobile networks
Operator Name of package Price in HRK
(VAT included)
T-Mobile Mobile Internet 500 MB 100.00
T-Mobile Mobile Internet 1 GB 200.00
T-Mobile Mobile Internet 3 GB 300.00
VIP net Mobile Broadband 512 GB 91.00
VIP net Mobile Broadband 1 GB 191.00
VIP net Mobile Broadband 3 GB 291.00
28 Broadband Internet access users mostly use packages including 1 GB of traffic. 29
The mentioned price refers to HT's tariff package within which access speed amounts to 2 Mbit/s, with
included 1 GB of traffic.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
20
VIP net Mobile Broadband Flat * 391.00
Tele2 Mobile Broadband 0 MB ** 0.00
Tele2 Mobile Broadband 500 MB 65.00
Tele2 Mobile Broadband 1 GB 125.00
Tele2 Mobile Broadband 3 GB 195.00
Source: official websites of operators T-Mobile, Vipnet and Tele2
Note: All subscribers of mobile Internet are charged a fee for the use of the radio frequency amounting to
HRK 10.00 per month.
* includes 10 GB of traffic
** does not include data transfer, charges per MB
Furthermore, any additional data transfer, that is, additional traffic30
, in mobile tariff
packages is charged per MB, ranging from 0.20 to 0.28 HRK/MB. Thus, the charge for an
additional GB of traffic in tariff packages based on access over mobile networks ranges from
HRK 204.80 to 286.72, while in tariff packages offered on the basis of ADSL access over
twisted-pair copper wire it amounts to HRK 20.0031
.
What follows from the above is that, if we take into account the retail price of mobile Internet
access services and Internet access services via ADSL access over twisted-pair copper wire,
in particular the fee for additional traffic, the hypothetic monopolist test shows that mobile
Internet access is not a substitute service of ADSL access over twisted-pair copper wire since
the increase in retail prices of tariff packages based on ADSL access over twisted-pair copper
wire between 5 and 10% will not influence the decision of end users to substitute the letter
service with the broadband Internet access service via mobile networks.
Furthermore, as opposed to tariff packages for ADSL access over twisted-pair copper wire,
the user of broadband Internet access over mobile network does not have the possibility to
choose a package with unlimited traffic32
. Considering the increasing share of users of basic
packages which include 1 GB and the increasing share of users of unlimited tariff packages
(Figure 4), the Agency does not consider the service of broadband Internet access over mobile
networks as a substitute service for ADSL access over twisted-pair copper wire.
Additionally, users of services of mobile Internet access are mostly corporate users who
appreciate mobility in the first place, as opposed to ADSL access over twisted-pair copper
wire which is primarily used by private users. Figure 5 shows the shares of private and
corporate users using broadband Internet access service over mobile networks from one of the
mobile operators. Precisely because of the fact that the majority of users of the above-
mentioned service are corporate users, and with the assumption that the above-mentioned
service is primarily needed for the purpose of mobility, it may be concluded that this service
does not represent a substitute service but a complementary service to services based on
ADSL access over twisted-pair copper wire.
30
Dana transfer, that is, traffic not included in the tariff package. 31 The price for additional GB of traffic within HT's tariff packages. 32
Although VIPnet does offer a tariff package Mobile Broadband Flat, this package does not include unlimited
traffic but 10 GB of traffic.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
21
Figure 5 Share of private and corporate users using broadband Internet access service over mobile
networks *
Source: Questionnaires for wholesale broadband access market
Note: * data from one of the mobile operators
As a result, the Agency is of the opinion that, considering its price and functional
characteristics, mobile Internet access does not represent a substitute service for ADSL access
over twisted-pair copper wire, and that these services will not be regarded as substitutable
services in the time period covered by this analysis. However, considering the increase in the
share of mobile Internet access in the total number of broadband Internet access users, the
Agency shall follow further development of the mentioned service and its influence on
broadband Internet access market.
4.1.2.3. Fixed wireless access
Fixed wireless access is achieved in the Republic of Croatia through the Homebox33
service,
WiMAX technology and the HotSpot service.The share of end users of broadband Internet
access service based on fixed wireless access is only 3.60%. From among the mentioned
services, Homebox service supplied by VIPnet has the largest number of users.
4.1.2.3.1 Fixed wireless access over the Homebox service
Homebox is a fixed wireless access service in the mobile electronic communications network
with the use of the radio-frequency spectrum. The mentioned service is based on EDGE,
UMTS and HSDPA technologies, and in areas covered by the HSDPA signal it enables
broadband Internet access with speed up to 1,8 Mbit/s, and in other areas with speed permitted
by UMTS and EDGE technologies. However, as it was already mentioned in relation to
mobile Internet access, access speed depends on the proximity of the base station of a mobile
network operator and the number of users accessing Internet at the same time, which may
result in lower access speed and poorer quality of service.
33
For the purposes of this document, the Homebox service shall include the Officebox service for corporate
users.
37.61%
62.39%
Corporate users Private users
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
22
Since the highest access speed allowing data transfer within the Homebox service is lower
even than the lowest access speed in tariff packages offered by HT, who has the biggest
number of end users, the Agency does not consider the Homebox service to be a substitute
service for ADSL access over twisted-pair copper wire. Furthermore, operators offer different
access speed within tariff packages based on ADSL access over twisted-pair copper wire,
while the user of the Homebox service who wants to increase access speed is limited with a
predetermined highest access speed up to 1.8 Mbit/s, which also depends on the coverage
with HSDPA signal.
A monthly fee for the Homebox service is HRK 150.00, and includes access to publicly
available telephone service, Internet access and 2 GB of traffic. Every additional data transfer
in tariff packages over mobile networks is charged HRK 0.20 per MB, that is, an additional
GB of traffic within the Homebox service amounts to HRK 204.80, while the same amount of
traffic in tariff packages offered on the basis of ADSL access over twisted-pair copper wire
amounts to HRK 20.00.
As opposed to tariff packages based on ADSL access over twisted-pair copper wire, the user
of the Homebox service may not chose another tariff package in terms of the amount of traffic
included in the monthly fee, except for the included 2 GB of traffic, not even the unlimited
tariff package. Taking into account the fact that the share of users of basic packages which
include 1 GB of traffic is decreasing, while the share of users of unlimited traffic packages is
increasing (see Figure 4), the Agency does not regard the Homebox services as a substitute
service for ADSL access over twisted-pair copper wire.
If one compares the monthly fee for the Homebox service and prices offered by HT for ADSL
access over twisted-pair copper wire and takes into account the monthly fee for the service of
access to a publicly available telephone service, a monthly fee for Internet access and Internet
traffic of 2 GB for which a user currently pays to HT the total price of HRK 192.20, the
hypothetical monopolist test might suggest that the mentioned services could be regarded as
substitute services. However, in case of the Homebox service, an additional GB of traffic,
which is not included in the tariff package for Homebox service, amounts to HRK 204.80. On
the other hand, in tariff packages offered on the basis of ADSL access over twisted-pair
copper wire, the additional GB amounts to HRK 20.00.
What follows from the above is that the Agency does not regard fixed wireless access over the
Homebox service and the service of ADSL access over twisted-pair copper wire as
substitutable services regardless of the fact that, in terms of the amount of the basic fee, the
Homebox service does represent a substitutable service for the HT’s service offered by means
of ADSL access over twisted-pair copper wire. However, if we take into account the price of
additional traffic, the two services may not be regarded as substitutable services. Therefore,
considering both the functional and price-related characteristics, and taking into account the
additional traffic and the share of users using the Homebox service, the Agency thinks that the
two services may not be regarded as substitute services in the time period covered by this
analysis. Nevertheless, the Agency shall follow further development of the mentioned service
and its influence on broadband Internet access market.
4.1.2.3.2 Fixed wireless access over the WiMAX technology
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
23
In late 2008 51 concessions for fixed wireless access over WiMAX technology34
were granted
in the Republic of Croatia. They were granted in all Croatian counties to the total of 8
operators. The only companies providing broadband Internet access over WiMAX technology
in certain counties are Novi-Net d.o.o., Optima Telekom d.d., and WiMAX Telecom d.o.o.
since the second half of 2008.
In the time periods covered by the questionnaire the number of end users of broadband
Internet access over WiMAX technology was negligible. The main reasons for the lack of
users of this technology in the provision of broadband Internet access are the lack of
standards, expensive terminal equipment and insufficient quality
Furthermore, some operators gave up the granted concessions35
. One operator mentions
problems encountered during implementation of the electronic communications system and
during commercial provision of the service. The problems were related to the usage of the
procured and installed equipment as well as to the fact that the service was not accepted on
the market, and the price of terminal equipment was too high. Since the mentioned reasons do
not allow the operator to provide the service in question on the basis of a long-term cost-
effective commercial model, the operator submitted a written request for the withdrawal of
the granted concessions.
As a result of the above, the Agency does not regard the mentioned technology to be a
substitute service for ADSL access over twisted-pair copper wire. Nevertheless, the Agency
shall observe the influence of the service in question on broadband Internet access market.
4.1.2.3.3 Fixed wireless access over the HotSpot service
The HotSpot service as a solution for wireless Internet access based on WLAN technology
may not be regarded as a substitute service because its price cannot compete with the price of
ADSL access over twisted-pair copper wire. For instance, T-Mobile measures Internet access
over the above-mentioned services in 15 minute intervals, and charges every interval at a
price of HRK 10.00. In other words, the service of Internet access over the Hot Spot service is
charged on the basis of duration, and not on the amount of transferred data as in the case of
broadband Internet access service based on ADSL access over twisted-pair copper wire.
HotSpot service also allows access at precisely designated locations such as city squares,
marinas, hotels and airports and it is not intended for usage in households and companies
which is why it does not represent a substitute for the service of ADSL access over twisted-
pair copper wire.
.
4.1.2.4. Access over cable networks
Access over cable networks is broadband Internet access allowing the user to connect by
using a coaxial cable (or over a hybrid fibre-coaxial network) which at the same time
broadcasts the cable television signal. Although the primary intention of the cable network is
to provide television contents, today, an increasing number of operators may, by means of
34
Some are for the territory of one county, and some for the territories of two or more neigthbouring counties. 35
Three operators gave up the total of 20 concessions.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
24
certain technical alterations on the networks, offer to their end users a publicly available
telephone service and data transfer.
Broadband Internet access over cable networks allows data transfer at an approximately
identical speed as ADSL access over twisted-pair copper wire. Internet access over cable
networks functions on the principle of bandwidth sharing. Cable modems are linked by
coaxial cables to the cable modem termination system (CMTS) which is a constituent part of
the CATV – local exchange of a cable network operator. Although this type of architecture
allows the broadcasting of the cable television signal to a large group of end users with a
relatively small number of cables, when using cable modems to access Internet, all users
linked with CMTS by means of a joint coaxial cable share the total transfer speed. In other
words, all users from the same or several neighbouring buildings share the same cable
connecting them to the central node and thus share the same frequency segment (bandwidth)
used by the cable modem. The result of this is that an individual user may not achieve
maximum speed at a certain moment or that transfer rate falls as a result of excessive overload
of the cable network.
The share of end users of broadband Internet access over cable networks in the Republic of
Croatia amounted 2.70% at the end of the first half of 2008.
The biggest cable operator B.net offers in a tariff package, which also includes publicly
available telephone service and Internet access of 2 Mbit/s for a price of HRK 159.00, the
possibility of unlimited Internet traffic and unlimited calls to all national fixed networks.
When comparing this package to a similar package offered by HT by means of the ADSL
access over twisted-pair copper wire, we have to take into account the monthly fee for the
service of access to the publicly available telephone service, a monthly fee for Internet access,
and unlimited Internet traffic for which the end user currently pays the price of HRK 251.20.
.
Table 3. B.net – tariff packages
Name of package Speed Price in HRK (VAT included)
Mistral Light 1024/128 94.00
Mistral 2048/384 145.00
Scirocco 3072/512 225.00
Bora 6144/768 303.00
Typhoon 16384/1024 434.00
2Mps,FLAT RATE+Xtel FLAT RATE 2048/256 kbps 159.00
Source:B.net’s official website
Note: All packages include unlimited Internet traffic
Furthermore, users of B.net-a may, at a price of HRK 145.00 and download access speed of 2
Mbit/s, use unlimited Internet traffic, while HT users have to pay HRK 178.00 for the same
package and an additional monthly fee for access to a publicly available telephone service.
The Agency thinks that the operator supplying broadband Internet accesses via ADSL access
over twisted-pair copper wire may not profit by increasing the prices of its services between 5
and 10% because the user will turn to cable networks for broadband Internet access, provided
that they are available.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
25
Also, since prices of both technologies used for Internet access are similar, access over cable
exerts a certain price-related pressure at the retail level against retail prices of ADSL access
over twisted-pair copper wire. What follows from the above is that access over cable
networks, considering its characteristics in terms of price and functionality, represents a
substitute service for ADSL access over twisted-pair copper wire at the retail market of
broadband Internet access.
4.1.2.5. Access over leased lines
Broadband access line is intended for business entities and big companies whose business
communication is based on the need for constant Internet presence and for high-speed transfer
of data. The advantages of line access are high speed, safety, maximum reliability,
simultaneous Internet access for a large number of users and the possibility of a constant
connection of the computer system to the Internet.
Furthermore, the price of a leased HT line of 2 Mbit/s capacity amounts to HRK 3,375.0036
while Internet access at a speed of 2 Mbit/s by means of ADSL access over twisted-pair
copper wire, which includes unlimited Internet traffic, amounts to HRK183.7537
.
For that reason the above-mentioned service, considering its characteristics in terms of price
and functionality, does not represent an adequate substitute for ADSL access over twisted-pair
copper wire.
4.1.2.6. Access over optical fibre
In the period covered by questionnaires, a small number of end users, mostly business users,
used the service of broadband Internet access over optical fibre. However, with the increase of
the selection of contents requiring broadband Internet access and an increasing demand for the
service of IP television, users will need more capacity, that is, the demand for high-speed
broadband Internet access will grow.
Since optical fibre permits higher transfer speed than DSL technologies, which makes
possible the provision of high-quality services and supports advanced IP applications, such as,
for example, HDTV (High Definition Television), the Agency expects the number of users to
which operators will provide broadband Internet access service via optical fibre to increase,
that is, there will be more users who will be ready to pay a higher price for a service of a
higher quality.
As a result of the above, the Agency’s opinion is that broadband Internet access over optical
fibre will have a significant influence on competition at the retail level, that is, the mentioned
services will be substitutable with the already existing services based on ADSL technology
because this will satisfy the need of users for more quality, faster and innovative services.
36
VAT not included 37
VAT not included.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
Fixed Location July 2009
26
In conclusion, while analysing the substitutability of demand at the wholesale level, the
Agency will investigate the influence of new technology access networks on the existing
wholesale services, that is, in this case on the regulated wholesale service of unbundled access
to the copper-based local loop.
4.1.2.7. Conclusion
As a result, the Agency has concluded that the demand for the service of wholesale (physical)
network infrastructure access (including share or fully unbundled access) at a fixed location
access arises from broadband Internet access services provided at the retail level which are
based on:
• xDSL access over twisted-pair copper wire,
• access over cable networks, and
• access over optical fibre.
.
4.1.3. Demand-side substitution – wholesale level
Demand-side substitutability at wholesale level should serve to establish substitute services
for the currently valid service of wholesale (physical) network infrastructure access (including
share or fully unbundled access) at a fixed location, in the manner that the users of this
service, should the incumbent increase the price of the service, build their own access
infrastructure or start using some other wholesale service which will be regarded as equivalent
to the valid service of wholesale (physical) network infrastructure access (including share or
fully unbundled access) at a fixed location.
The prerequisite for the use of the broadband Internet access service and data transfer by the
end user is the existence of a certain transmission channel to the location of the end user
enabling the transmission of data in both directions at a speed permitting the provision of the
mentioned service.
In order to be able to provide broadband Internet access service at the retail level, operators
may build their own infrastructure up to the end user. This is the case of self-supply of
broadband Internet access, that is, the operator is not using the wholesale service of another
operator to provide broadband access service to end users.
A part of the infrastructure requiring the biggest investments is the local loop38
. Therefore, the
service of unbundled access to the local loop is an important prerequisite for operators
without their own infrastructure to be able to provide broadband Internet access service to its
own end users.
In the Republic of Croatia, an operator wishing to provide the service of broadband Internet
access to the end user, and does not have its own access infrastructure, may use the existing
wholesale service of unbundled access to the copper-based local loop in accordance with the
38
A local loop is a physical circuit connecting the network termination point at the subscriber's
premises to the main distribution frame or equivalent facility in the fixed public telephone network;.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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conditions from the HT’s Reference Offer for the service of unbundled access to the local
loop.
The current service of unbundled access to the local loop is based on twisted-pair copper wire
and it includes the service of fully unbundled access to the local loop and the service of shared
access to the local loop which does not entail a change in ownership of the local loop and it is
provided only together with the collocation service. HT ensures access to the local loop only
for end users connected to HT’s electronic communications network or users at whose
location there has been installed an available inactive twisted-pair copper wire39
.
The service of fully unbundled access to the local loop provides to the operator access to the
entire frequency spectrum of the local loop (twisted copper pair) Figure 6 shows parts of
unbundled access to the local loop.
Figure 4 Unbundled access to the local loop
Source: HT’s Reference offer for the service of unbundled access to the local loop
On the other hand, the service of shared unbundled access to the local loop allows use only of
the non-voice band frequency spectrum of the unbundled local loop (twisted copper pair),
while the voice band of the frequency spectrum of the unbundled local loop is still used by
HT for the provision of publicly available telephone services. Figure 2 illustrates shared
unbundled access to the local loop.
39
Operational reserves are not regarded as available inactive twisted-pair copper wire.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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Figure 5 Shared unbundled access to the local loop – HT’s Reference Offer
Source: HT’s Reference Offer for the service of unbundled access to the local loop
The service of fully unbundled access to the local loop and the service of shared unbundled
access to the local loop represent different technical solutions allowing the operator to provide
the service of access to fixed electronic communications network to end users over HT’s
access network.
The Agency considers the service of fully unbundled access to the local loop and the service
of shared unbundled access to the local loop as substitute services because in case of a
hypothetical price increase of the service of fully unbundled access to the local loop, the
operators using the latter service could, without significant additional costs, switch to the
service of shared unbundled access to the local loop..
Demand-side substitution should help establish substitute service for the wholesale service of
unbundled access to the copper-based local loop in the manner that users of this service, if HT
increases the price, can build their own infrastructure or start using the equivalent service
from another operator, that is, a service regarded as substitute service for the wholesale
service of unbundled access to the copper-based local loop.
4.1.3.1. Service of unbundled access to the local loop based on advanced technical
solutions in the access network as a substitute service for the service of
unbundled access to the copper-based local loop
By investing into the access network, operators place optical cables closer to the end user or
up to the end user’s premises, that is, they are partially or fully replacing the twisted copper
pair by optical fibres in order to be able to provide more quality and innovative services to
end users at greater access speed, and to reduce operational costs..
New generation access networks comprise the following technical solutions, that is, network
architectures:
• Fibre to the Cabinet (FttCab) concept – in which case twisted copper pair is used
from the end user to the street cabinet, and optical fibre is used from the street cabinet
to the MDF;
• Fibre to the Building (FttB) concept – in which case twisted copper pair is used from
the end user to the distribution point (installation cabinet) in a building, and optical
cable from the building to the MDF;
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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• Fibre to the Home (FttH) concept – in which case the existing twisted copper pair is
completely replaced by optical fibre from the operator’s MDF.
The Agency also discussed the substitutability between the service of unbundled access to the
local loop on the basis of the mentioned technical solutions in the access network and the
service of unbundled access to the local loop based on ADSL technology over twisted-pair
copper wire. Since the FttB solution is regarded as the FttH solution, although it is a hybrid
solution based on optical fibre and copper cables, it will be discussed in the part referring to
the service of unbundled access to the local loop based on the FttH solution.
.
4.1.3.1.1 Service of unbundled access to the local loop based on FttCab solution
By investing into the access infrastructure operators may shorten the twisted copper pair, that
is, the twisted-pair copper cable by replacing it with optical fibre from the main distribution
frame to the street cabinet (FttCab - Fiber to the Cabinet) or to some other point in the fixed
electronic communications network (See Figure 9). The beneficiary operator places DSLAM
inside a street cabinet or some other concentration point and via VDSL technology offers to
end users faster data transfer compared to data transfer provided by means of ADSL
technology. Therefore, in case of FttCab solution, the operator may unbundle access at the
street cabinet or other concentration point. In other words, this is the case of unbundled access
to the local sub-loop40
. Figure 6 FttCab solution
Source: ERG Opinion on Regulatory Principles of NGA, ERG (07) 16rev2
Note: SC – street cabinet
Considering the limitations of the existing twisted copper pairs, it is impossible to link a
certain DSL technology to every pair in a cable because in such cases mutual harmful
interferences (i.e. crosstalk) between pairs would be excessive and they would additionally
limit the range and quality of transmission. Furthermore, due to the overbooking, all users do
not get the same quality of service of broadband Internet access and IP television and some
twisted copper pairs do not even support the mentioned services. It follows from the above
that it may be expected in the upcoming period that the operators will invest in access
infrastructure in order to satisfy the needs of users, that is, in order to offer a wide range of
services such as the transfer of multi channel HDTV (eng. High Definition Television), video
on demand and video conferences, and voice over internet protocol services (VoIP).
Since the Agency has established at the retail level that broadband Internet access services via
VDSL technology may be regarded as substitute services for broadband Internet access via
40
Local sub-loop means a partial local loop connecting the network termination point at the subscriber's
premises to a concentration point or a specified intermediate access point in the fixed public telephone network.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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ADSL technology, it is necessary to investigate whether the service of unbundled access to
the local sub-loop which is based on the FttCab solution and the service of unbundled access
to the copper-based local loop may be regarded as substitute services.
It has been European practice that former incumbents invest into their access infrastructure by
shortening the length of the twisted copper pair to the end user by installing optical fibre on
certain locations from the MDF to the street cabinet in order to be able to provide to those end
users who need greater access speed access to the broadband Internet access service and
related facilities via VDSL technology. The Agency thinks that HT should, pursuant to the
European practice, and in the time period covered by this analysis, provide services via the
VDSL technology and that they will not significantly differ from services provided over
ADSL technology and similar technologies, except in terms of quality. Therefore, these two
services, as it was concluded on retail level as well, may be regarded as substitute services.
Additionally, in accordance with the Explanatory Memorandum41
, technological
developments and new investments such as an upgrade of an existing service do not
automatically lead to a new or emerging market. Furthermore, if the upgraded service will
replace the existing service in such a manner that the existing service would no longer be
offered on the market, the upgraded or the new product should then be included into the
market dimension.
It may therefore be concluded that the modernisation of the access network based on the
construction of street cabinets and the shortening of the existing twisted copper pair represents
an upgrade of the access network based on the twisted copper pair. What follows form the
above is that the service of unbundled access to the local sub-loop, which is based on the
FttCab solution, does not represent a new market but enters a dimension of services of the
same relevant market whose dimension of services includes the service of unbundled access
to the copper-based local loop. The shortening of the twisted copper pair and applying of
VDSL technology do not destroy the possibility of access to the end user but access is only
provided over a shortened pair and by means of a different technology.
The behaviour of users at the retail level leads to substitute services for the service of
unbundled access to the local loop at the wholesale level. Since the service of unbundled
access to the local sub-loop based on FttCab solution will serve to provide a service of
broadband Internet access which is equivalent to the service of unbundled access to the
copper-based local loop, it may be concluded that the service of unbundled access to the local
sub-loop based on FttCab solution is a substitute service to the service of unbundled access to
the copper-based local loop.
It follows that, although in the Republic of Croatia there is no wholesale service of unbundled
access to the local loop that would allow an operator which does not have its own access
infrastructure to unbundle the twister-pair copper wire at the location of the street cabinet or
some other concentration point and to provide services to the end user over VDSL
technology, the Agency thinks that the service in question will become important in the time
period covered by this analysis, and that the service provided over unbundled local sub-loop
may be identical to the service provided over unbundled local loop. In other words, taking
into account the hypothetical price increase, the service of unbundled access to the local loop
41
Explanatory Memorandum, p. 18
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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based on FttCab solution is a substitute service for the service of unbundled access to the
copper-based local loop.
4.1.3.1.2 Service of unbundled access to the local loop based on FttH solution
In addition to investing into access infrastructure by replacing copper cables, that is twisted
copper pairs, by optical cables from the MDF to the street cabinet or some other concentration
point in the fixed electronic communications network, operators may completely replace the
twisted copper pair by optical fibre from the local exchange to the user’s premises (FttH -
Fibre to the Home).
Access network based on FttH solution may be realised in the following manner:
• Point to point link, where each directly connects the local exchange and the end
user (see Figure 10), and
• Passive optical networks (PON), which are structured in the manner that the signal
in the optical fibre is split into several fibres and vice versa, that several optical
signals are combined into one fibre (See Figure 11). In that case two or one fibres
may be used for two-way communication. If transfer takes place on one fibre,
input and output signals differ in wave length.
If operators decide to built FttH access network based on the point-to-point design, where
each directly connects the local exchange and the end user (see Figure 9), then this concept
allows access to the unbundled local loop (optical fibre) over an optical cable because every
user is allocated a separate optical fibre which may be individually unbundled.
Figure 7 Point-to-point FttH design
Source: ERG Opinion on Regulatory Principles of NGA, ERG (07) 16rev2
If operators decide to build a FttH access network based on a passive optical network (point-
to-multipoint) which enables the sharing of one optical fibre between several users (see figure
10), local loop unbundling will not be possible for several years, or, in other words, open
access to layer 1 of the OSI model42
will not be possible, but only to layers 2 or 3 (by means
of bitstream access services). Only new technological solutions in the area of WDM43
(CWDM44
and DWDM45
) technologies will make possible unbundled access based on
wavelength in PON architecture networks.
42 eng. Open Systems Interconnection Model 43
. wavelength-division multiplexing 44
coarse wavelength-division multiplexing
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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Figure 8 Point-to-multipoint FttH solution– PON architecture
Source: ERG Opinion on Regulatory Principles of NGA, ERG (07) 16rev2
FttH design includes FttB design where the optical cable is rolled out very close to the end
user, up to the building itself, and a twisted copper pair is used from the building to the end
user. In this case it is also possible to use point-to-point and point-to-multipoint solutions,
however, inside wiring remains copper based.
As it was already concluded in the previous chapter, as the selection of contents requiring
broadband Internet access and the demand for IP television increase, resulting in the demand
of users for more capacity, that is, for high-speed broadband Internet access, ADSL and
related solutions might prove to be inefficient in situations demanding simultaneous transfer
of voice telephony, interactive video and high-speed data services between end users and the
local exchange. Therefore, it may be concluded that operators can be expected to invest in
access infrastructure in order to satisfy the needs of users, that is, to be able to provide a wide
spectrum of services such as the transmission of multichannel HDTV, video on demand and
videoconferences, as well as the service of voice over the Internet protocol (VoIP).
If an operator decides to do so, he will be faced by significant investments which primarily
depend on the condition of the operator’s network and on competition at the retail level. Costs
of modernising the access network and of building new access networks to end users are
significant but the new generation access (in this case FttH) to the end user offers to the
operator who modernised its network a possibility for considerable and long-term savings in
terms of operational costs, and, more importantly, the platform i.e. the basis of the provision
of more quality, innovative and potentially more profitable services to end users.
HT notified the Agency in an official letter of 13 February 2008 of its intention to initiate a
pilot project aimed at testing the optical access infrastructure and the related network
solutions in order to, quote: … prepare the conditions for commercial supply of this
infrastructure to the wider population of users in the territory of the Republic of Croatia”.
This clearly shows that HT plans investments into the access network aimed at replacing
twisted copper pair wire with optical fibre.
Behaviour of end users at the retail level also results in substitute services for the service of
unbundled access to the local loop at the wholesale level. Since optical fibre allows greater
transfer speed than DSL technologies, which enables the provision of high quality services,
and supports advanced IP applications, such as, for example HDTV; the Agency thinks that
broadband Internet access service over optical fibre will have a significant influence on
competition at the retail level, i.e. these services will be substitutable with the already existing
45
dense wavelength-division multiplexing
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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services based on ADSL technology because they would satisfy the need of users for more
quality, faster and innovative services.
Since services provided by means of service of unbundled access to the local sub-loop based
on FttH solution will be equivalent to the service of broadband Internet access to a certain end
user provided via the service of unbundled access to the copper-based local loop, it may be
concluded that the service of unbundled access to the local loop based on FttH solution is a
substitute service for the service unbundled access to the copper-based local loop.
Additionally, in accordance with the Explanatory Memorandum46
, technological
developments and new investments such as an upgrade of an existing service do not
automatically lead to a new or emerging market. Furthermore, if the upgraded service will
replace the existing service in such a manner that the existing service would no longer be
offered on the market, the upgraded or the new product should then be included into the
market dimension.
What follows from the above is that because of technological changes, that is, technological
development, and bearing in mind the principle of technological neutrality, the Agency will
take into account all types of physical access infrastructure providing access to the end user
without limiting itself to the twisted copper pair. In other words, for the purpose of this
analysis, it shall consider the service of unbundled access to the fibre-based local loop as a
service equivalent to the service of unbundled access to the copper-based local loop.
The fact that, in case of investments into new generation access networks, civil engineering
works make 50-80% of network building costs47
, influences the possibility of other operators
on the market, except to the incumbent, who do not have a significant penetration rate and
density of users or their distributional telecommunication channels (DTC) doing the same
thing. In addition to open issues related to DTC and rights of ways, other operators have little
change of replicating the incumbent’s network which results in problems in case of
investments into new generation access networks. This should include the already made
investments of new operators, and the possibility of substitution.
Since access, and core, networks have been undergoing modernisation, the twisted copper pair
has been partially, or fully, replaced by optical fibre by means of shortening or disappearing,
this does not mean that the possibility of access or access to the end user in these cases
disappears but only that access is provided by means of a completely different technology.
The behaviour of users at the retail level leads to substitute services for the service of
unbundled access to the copper based local loop at the wholesale level.
In other words, from the principle of technological neutrality and the fact that access to the
certain end user is not provided over twister-pair copper wire but over optical fibre, it is
obvious that access over optical fibre represents a substitute service for unbundled copper-
based local loop access.
In accordance with EU recommendations, the analysis of this and other markets was
conducted by the Agency on the basis of the technological neutrality principle, which means
46
Explanatory Memorandum, p. 18 47
Explanatory Memorandum, p. 17
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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that access to the end user in case of replacement of twisted copper pair with optical fibre
remains the same, that is, the end user will still receive the service but the service will be
provided over a new access infrastructure.
What follows from the above is that because of technological changes, that is, technological
development, and bearing in mind the principle of technological neutrality, the Agency will
take into account all types of physical access infrastructure providing access to the end user
without limiting itself to the twisted copper pair. In other words, for the purpose of this
analysis, it shall consider the service of unbundled access to the fibre loop as a service
equivalent to the service of unbundled access to the copper-based local loop.
It follows that, although in the Republic of Croatia there is no wholesale service of unbundled
access to the local loop that would allow an operator which does not have its own access
infrastructure to provide broadband Internet access service over optical fibre, the Agency
thinks that service provided over unbundled access to the local loop based on FttH solution
may be equivalent to the service provided by means of unbundled access to the copper-based
local loop. In other words, taking into account the hypothetical price increase of the valid
wholesale service, the service of unbundled access to the local loop based on FttCab solution
is regarded as a substitute service for the service of unbundled access to the copper-based
local loop.
However, since unbundled access in case of PON architecture is not possible in the time
period covered by this analysis, the Agency deems it necessary to include into the dimension
of the relevant market only the service of unbundled access to the local loop based on point-
to-point FttH design.
4.1.3.2. Bitstream service as a substitute service for the service of unbundled access to
the local loop
In addition to the wholesale service of unbundled access to the copper-based local loop,
operators in the Republic of Croatia may provide the service of broadband Internet access to
end users via ADSL transport service or an operator may combine the ADSL transport with
the wholesale service of ADSL access, which corresponds to the service of bitstream access
pursuant to the conditions from the Annex to HT’s Reference Offer for providers of Internet
access service referring to broadband Internet access.
The wholesale ADSL transport service enables the operator to provide broadband ADSL
Internet services to its own end users who are at the same time HT’s subscribers for the
service of ADSL access, over IP/Ethernet platforms (the third option according to ERG’s
document on bitstream access. In other words, the beneficiary operator uses HT’s backhaul
capacities which ensure the transmission of signals between the access network and the core
network in order to offer retail service to its end users. The peculiarity of this service is that
HT offers to the operator only the usage of network transfer capacity (traffic) while Internet
access (monthly fee for access speed) is still charged top the end user by HT.
Pursuant to a decision adopted by the Agency’s Council48
from December 2007, HT has been
offering the service of ADSL access since February 2008 together with ADSL transport
service (which corresponds to bitstream access service), which enables to operator to provide
48
A decision of the Agency’s Council of 21 December 2007 (Class: 344-01/06-01/678;Reg.No: 376-11-07-27)
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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retail ADSL access service to its end users who are at the same time HT’s subscribers for
access to fixed public telecommunications network via POTS/ISDN BRA connections.
According to the Explanatory Memorandum49
, the wholesale service of unbundled access to
the local loop and the wholesale broadband access service, which includes bitstream access,
make two separate relevant markets susceptible to ex ante regulation 50
. An operator using the
service of unbundled access to the local loop will not consider the service of broadband access
as a substitute service although the wholesale service of unbundled access to the local loop
allows him to provide at the retail level a service equivalent to the one provided by means of
unbundled access to the local loop.
.
The service of unbundled access to the local loop gives an operator greater flexibility and
control when providing services to the end user since the operator runs DSLAM, and in this
manner the operator supplies to the end user a complete service, defines the technical and
qualitative characteristics of the service and access speed regardless of HT’s retail offer. The
plan for attracting end users by means of the service of unbundled access to the local loop
depends on the business plan of the new operator and the geographical areas in which the
operator wishes to enable the provision of ADSL access by installing DSLAMs, as opposed
bitstream access service where the incumbent defines the plan for the development of its
network which may not be influenced by the new operator.
The operator using the incumbent’s network by means of different forms of bitstream access
(the three options from ERG’s document on bitstream access51
) or just resells the incumbent’s
services may not completely influence technical and qualitative characteristics of the service
provided to the end user, as it is the case in local loop unbundling. The closer the operator is
to the end user from the point where resale takes place to the point of access to DSLAM, the
more influence it has on the quality of its own service.
The example of the existing wholesale ADSL transport, or bitstream access, shows that new
operators need only minor investments to attract end users, but this service does not allow
them to fully differentiate services intended for end users. The ADSLN transport or bitstream
access service allows an operator only to supply speed identical to or lower than the access
speed supplied by the incumbent at the retail level, and may not influence the possibility of
access to the end user, which is a very important fact because the network development plan
depends on the incumbent.
Therefore, since, in case of ADSL transport service, that is, bitstream access service, the
operator does not have full control over the access to the end user it may not freely
personalise its services for the end user, which is something that the service of unbundled
access to the local loop allows.
Furthermore, since the service of unbundled access to the local loop, without taking into
account the building of own infrastructure, occupies the highest place on the ladder of
investments, the operator using this service has incurred significant investment costs,
49
p. 33 50
In accordance with the recommendation from the Explanatory Memorandum that these two relevant markets
must be analysed together, that is, at the same time, the Agency initiated the process of market analysis of
wholesale broadband access simultaneous with the process of analysis of the market of wholesale network
infrastructure access (including shared and full access) at a fixed location, which is the subject ot this document. 51
ERG (03) 33rev2, ERG Common Position on wholesale bitstream access
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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including collocation costs, in order to have access to the main distribution frame in the local
exchange. Therefore, the operator in question, in case of a small but significant, permanent
price increase of the wholesale service of unbundled access to the local loop, from 5 to 10%,
will not regard ADSL transport service, that is, bitstream access service, as a substitute
service.
In conclusion, taking into account the characteristics of the wholesale service of ADSL
transport, that is, bitstream access in terms of price and functionality, the Agency’s opinion is
that thee services do not represent substitute services for the service of unbundled access to
the local loop, and, therefore, are not a part of the same relevant market.
4.1.3.3. Building own infrastructure as a substitute service for the service of unbundled
access to the local loop
In this part we consider the possibility of an operator investing into its own access
infrastructure because of a hypothetical increase in the price of the service of unbundled
access to the local loop.
The rolling out of own access network to the end user takes a long time and requires a lot of
sunk costs. The main reason for investing into one’s own access infrastructure is the sufficient
penetration and density of users. Consequently, only if there is an efficient ratio between
coverage and density, the building of own infrastructure would represent an adequate
substitute service for the service of unbundled access to the local loop supplied by the
incumbent.
Additionally, in accordance with European Commission guidelines on market analysis and
assessment of significant market power, if the user faces significant transfer costs in case of
substitution of service A with service B, these two services should not be included into the
same market.
.
Consequently, the Agency feels that the operator will not be encouraged by a hypothetical
increase in the price of the service of unbundled access to the local loop to build its own
access infrastructure, that is, that the building of own access infrastructure does not represent
a substitute service for the service of unbundled access to the local loop.
.
4.1.3.4. Broadband Internet access service for self-supply as a substitute service for the
service of unbundled access to the local loop
Given that at the retail level broadband Internet access services based on xDSL access over
copper, access over cable networks and access over optical fibre are regarded as substitute
services, it must be established whether there is at the retail level sufficient competitive
pressure from operators providing these service over their own infrastructure, that is, for the
purpose of self-supply, to the extent that they can influence the determination of prices of the
service of unbundled access to the local loop. In case of a significant competitive pressure at
the retail level, the dimension of services of the relevant market must include the service of
broadband Internet access provided by operators for the purpose of self supply.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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The increase in the price of the wholesale service of unbundled access to the local loop
provided by the incumbent should result in the increase of the retail price of operators
providing broadband Internet access service to end users by means of unbundled access to the
local loop because operators will have to transfer the increase of wholesale costs to end users.
End users will be faced with the increase in the price of retail services based on the service of
unbundled access to the local loop and they will start using those services provided over own
access infrastructure, which represent substitute services at the retail level, because they will
be more affordable.
.
However, the Agency thinks that operators providing broadband Internet access service for
the purpose of self supply may not influence the setting of prices of the service of unbundled
access to the local loop at the retail level by means of competitive pressure. There is no such
competitive pressure that would prevent the incumbent from the intention to increase the price
of service between 5 and 10%, lacking regulation of the service of unbundled access to the
local loop, because operators do not have the option to switch to some other operators, and
they, most likely, in order to keep their end users, will not charge their end users the
difference in the price of wholesale service.
.
The Agency also feels that should the operator charge the difference in price in case of price
increase to the end user, those end users using the service of unbundled access to the local
loop will substitute this operator’s service with the service provided by HT because it has
greater penetration than the service supplied by other operators by means of their own
infrastructure. However, even on territories where operators provide broadband Internet
access service for the purpose of self-supply, there is no significant competitive pressure at
the retail level, and this is evident from the fact that HT is not forced to provide the service in
question at lower prices in these areas compared to some other areas.
Consequently, the Agency feels that, in the time period to which this analysis refers,
broadband Internet access service provided by other operators for the purpose of self-supply,
regardless of access infrastructure, does not fall into the dimension of services of the relevant
market.
On the other hand, due to the coverage of HT’s network, it is necessary to consider the
influence of the service of network access over copper provided by HT for the purpose of
self-supply. Since HT may, without significant additional costs, provide broadband Internet
access to all end users of the operator using the service of unbundled access to the local loop
for network access, the Agency thinks that, if the operator using the service of unbundled
access to the local loop transfers the hypothetical price increase of the relevant service on the
end user, the majority of its end users will switch to the service offered by HT. Also, one
needs to take into account the forward looking principle and consider the influence of the
service of network infrastructure access based on FttCab concept offered by HT for self-
supply and the service of network infrastructure access based on FttH concept offered by HT
for self-supply.. Although HT did not specify in questionnaires delivered for the purpose of
analysis of this relevant market that it provides the mentioned network infrastructure access
services to the end users, these types of broadband access provided by HT for self-supply
need to be included if we take into account the development of the market, and wholesale
services.
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In conclusion, the service of network infrastructure access provided by HT for self-supply
needs to be included into the dimensions of services of the relevant market regardless of the
fact whether it is an access technology based on twisted copper pair, a hybrid solution which
includes twisted copper pair and optical fibres, or only optical fibre.
4.1.4. Supply-side substitution
Supply-side substitution means that other operators may, as a result of a hypothetical increase
in the price of the current wholesale service of unbundled access to the copper-based local
loop in the time period covered by this analysis, offer a service equivalent to this wholesale
service without incurring significant additional costs
The Agency expects that, in case of hypothetical increase in the price of the current wholesale
service of unbundled access to the local loop supplied by HT, no operator will be able to
replicate HT’s network infrastructure to be able to provide the service of unbundled access to
the local loop in the time period covered by this analysis because of significant sunk costs
related to the building of own infrastructure.
Furthermore, the Agency considered the possibility for an operator to start supplying a service
equivalent to the service of unbundled access to the local loop. In accordance with the
Explanatory Memorandum52
, unbundled access to the cable network is currently not
technically feasible or cost-effective. Therefore, the Agency thinks that unbundled access over
cable networks does not enter the dimension of service of the relevant market in the time
period covered by this analysis.
In conclusion, the Agency believes in the Republic of Croatia there is no substitute service for
the current service of unbundled access to the local loop in terms of supply.
.
4.1.5. Collocation service
The collocation service is a precondition for using the service of unbundled access to the local
loop. Therefore, the Agency deems it necessary to include the collocation service into the
dimension of services of the relevant market.
The collocation service means the provision of physical space and technical facilities
necessary to reasonably accommodate and connect the relevant equipment of a beneficiary for
the purpose of using the service of unbundled access to the local loop. There are the following
types of collocation:
• Physical collocation –collocation in separate premises for collocation, in street
cabinets and in premises of the main distribution frame;
• Distant collocation – collocation in premises or street cabinets which have been
installed or rented on public or private property by the operator using the collocation
service;
• Virtual collocation – collocation at the premises of the provider of the service of
collocation; in this case the beneficiary operator of the service of collocation does not
have the authorisation to access the equipment necessary for the service of unbundled
52
Explanatory Memorandum, p. 34
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access to the local loop but the equipment is located, installed, maintained and run
only by the operator offering the service of collocation.
Furthermore, the dimension of services of the relevant market should include the service of
collocation for every technical possibility for the local loop unbundling entering the market
dimension.
4.1.6. Conclusion on the relevant market in the dimension of services
As a result, the Agency has concluded that the relevant market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location
includes the following services:
• The service of full unbundled access to the copper-based local loop and local sub loop authorising the operator to use the full frequency spectrum of the local loop,
• The service of full unbundled access to the copper-based local loop and local sub-loop authorising the operator to use only the non-voice band of the frequency
spectrum of the unbundled loop or local sub-loop (twisted copper pair), while the
voice band of the frequency spectrum of the unbundled loop or local sub-loop is still
used by HT for the provision of publicly available telephone service,
• The service of unbundled access to the fibre loop by means of point-to-point link ,
• The service of network infrastructure access provided by HT for self-supply regardless of the fact whether access technology is based on twisted-copper pair, a
hybrid solution including both twisted copper pair and optical fibre or on optical fibre,
• A collocation service, including physical, distant and virtual collocation.
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4.2. Relevant market in the geographical dimension
A relevant market in the geographical dimension comprises all areas where certain operators
provide services under equivalent conditions, that is, all areas where there are equivalent
conditions for competition.
In accordance with European Commission guidelines and recommendations, geographical
dimension of a relevant market is mostly determined on the basis of network coverage and
existence of an identical legal and regulatory framework in a certain geographical area.
Consequently, and on the basis of the conducted analysis, the Agency thinks that the scope of
the relevant market of wholesale (physical) network infrastructure access (including shared
and fully unbundled access) at a fixed location in the geographical dimension is national, that
is, the relevant market in the geographical dimension is the entire territory of the Republic of
Croatia. This conclusion is based on the fact that HT provides the current service which is a
part of the relevant market in the entire territory of the Republic of Croatia for all operators,
under equivalent conditions and at equivalent prices. And secondly, the regulatory framework
applicable to the service in question, that is, the legal and regulatory framework for the
electronic communications sector, is identical in the entire territory of the Republic of Croatia
4.3. Opinion of the competent regulatory authority on the definition of the
relevant market
On the basis of the conducted analysis, the Agency has concluded that the relevant market of
wholesale (physical) network infrastructure access (including shared and fully unbundled
access) at a fixed location comprises the following services:
• The service of fully unbundled access to the copper-based local loop and copper-based local sub loop authorising the operator to use the full frequency spectrum of the
local loop,
• The service of fully unbundled access to the copper-based local loop and copper-based local sub-loop authorising the operator to use only the non-voice band of the
frequency spectrum of the unbundled loop or local sub-loop (twisted copper pair),
while the voice band of the frequency spectrum of the unbundled loop or local sub-
loop is still used by HT for the provision of publicly available telephone service,
• The service of unbundled access to the fibre local loop by means of point-to-point
link,
• The service of network infrastructure access provided by HT for self-supply regardless of the fact whether access technology is based on twisted copper pair, a
hybrid solution including both twisted copper pair and optical fibre or on optical fibre,
• A collocation service, including physical, distant and virtual collocation.
Furthermore, the Agency has defined that the relevant market in the geographical dimension
is the national territory of the Republic of Croatia.
.
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5. Objective and Subject of Market Analysis
In accordance with the criteria laid down in ECA, in the process of market analysis, the
Agency shall evaluate the efficiency of competition in a certain relevant market and assess the
existence of operators with significant market power in a certain relevant market. It shall
adopt a decision thereof in accordance with ECA and the opinion of the authority competent
for competition.
An operator shall be deemed to have significant market power if, either individually or jointly
with other operators, it enjoys a position equivalent to dominance, that is to say a position of
economic strength affording it the power to behave to an appreciable extent independently of
competitors, users of services and consumers.
For the purpose of assessing significant market power of an operator, the Agency shall
calculate the market share in a certain relevant market and interpret it in accordance with the
European Commission guidelines on relevant markets and with the relevant European Union
acquis communautaire in the competition sector.
After having identified and defined a relevant market, as described in chapters 3 and 4 of this
document, the Agency shall, on the basis of collected data and in accordance with criteria
referred to in Article 55 of ECA, assess whether there is on the market in question an operator
with significant market power who is in such a position of economic strength affording it the
power to behave to an appreciable extent independently of competitors, users of services and
consumers.
When assessing the individual significant market power of an operator in the relevant market
of wholesale (physical) network infrastructure access (including shared and fully unbundled
access) at a fixed location, the Agency applied the following criteria:
• market share of the operator in the relevant market;,
• control of infrastructure where there are high barriers to the development of
infrastructural competition,
• economies of scale;
• economies of scope;
• lack of countervailing buying power,
• level of vertical integration.
.
5.1. Market share of an operator on the relevant market
The market share of an operator is a measure of a relative size of a certain operator in the
market and it is expressed as a percentage share of the operator in the total volume of
provided services and/or income earned on the relevant market over a certain period of time.
.
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For the purpose of assessing the significant market power of an operator, the Agency shall
calculate the market share on a certain relevant market and interpret it in accordance with the
European Commission guidelines and with the relevant European Union acquis
communautaire in the competition sector.
Although, according to the Guidelines, although a high market share alone is not sufficient to
establish the possession of significant market power, it is unlikely that an operator without a
significant share of the relevant market would be in a dominant position. Thus, operators with
market shares of no more than 25 % are not likely to enjoy a (single) dominant position on the
market concerned. In the Commission's decision-making practice, single dominance concerns
normally arise in the case of operators with market shares of over 40 %, although the
Commission may in some cases have concerns about dominance even with lower market
shares. According to established case-law, very large market shares, in excess of 50 %, are in
themselves, save in exceptional circumstances, evidence of the existence of a dominant
position.
An operator with a large market share may be presumed to have SMP if its market share has
remained stable over a certain period of time. The fact that a SMP operator is gradually losing
market share may well indicate that the market is becoming more competitive, but it does not
preclude a finding of significant market power. On the other hand, fluctuating market shares
over time may be indicative of a lack of market power in the relevant market.
In accordance with the established dimension of services and the geographical dimension of
the relevant market of wholesale (physical) network infrastructure access (including shared
and fully unbundled access) at a fixed location), and considering the fact that only HT
supplies the service of unbundled access to the copper-based local loop, including shared and
fully unbundled access) in the observed period, the Agency’s conclusion is that HT has a
100% market share in the relevant market.
Figure 11 illustrates the percentage share of the service of network infrastructure access over
twisted-copper pair provided by HT for the purpose of self-supply and the percentage share of
the wholesale service of unbundled access to the local loop53
offered to other operators. The
share of the wholesale service of unbundled access to the local loop has grown in the
observed period of time but network infrastructure access provided by HT for self-supply is
still significant.
Figure 9 Network infrastructure access
53
Service of unbundled access to the local loop includes full and shared unbundled access to the local loop.
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Source: Questionnaire for wholesale network infrastructure access
5.2. Control of infrastructure in case of significant problems for
infrastructure competition
Capital investments necessary for the building and installation of access network
infrastructure are extremely high and require detailed business plans and a reasonable rate of
return on investments. Market entry requires significant investments from new operators
which mostly consist of sunk costs which operators will not be able to recover in case of
market failure and exit from the market.
In order to roll out access network based on twisted copper pairs or optical fibre to the end
users, a new operator must build its own access infrastructure to the end user or it may use the
access infrastructure of another operator. Building own access infrastructure is difficult not
only because of significant sunk costs resulting from the need for civil engineering works and
for rolling out the distribution telecommunication cables but also because it is impossible to
get the necessary building permits. Taking into account the geographical distribution of HT’s
access (network) infrastructure, and the fact that it was being built over a long period of time,
that is, when HT was a public company enjoying exclusive rights, it is not economically
justified to replicate HT’s access (network) infrastructure.
Furthermore, investments into new generation networks, rolling out of optical cables within
the existing access infrastructure, to the street cabinet or to the end user’s premises, make a
very small share in the total costs of the building of access infrastructure since costs of civil
engineering works amount to about 50-80% of total costs of building access infrastructure.
The Agency, therefore, thinks that HT will strengthen its market position by investing into
access optical network because in most cases it already has an access infrastructure within
which it will implement optical access network. This puts it at an advantage in relation to
other operators. Secondly, by investing into optical access network, HT may design such
network architecture that will strengthen its market position, which, in the end, might lead to
the re-emergence of monopoly in the market.
99.96%
0.04%
99.27%
0.73%
97.79%
2.21%
95.79%
4,21%
0%
20%
40%
60%
80%
100%
2006/2 2007/1 2007/2 2008/1
Full access to unbundled local loop
HT network infrastructure access for self-supply
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Consequently, the Agency thinks that, during the period of validity of this analysis, no
operator will be able to replicate HT’s network infrastructure and thus endanger its market
position in the relevant market. Moreover, based on control of infrastructure, HT has been
additionally strengthening its market position by investing into optical access network.
5.3. Economies of scale
Economies of scale occur when average production costs decrease with the increase of output
that is, average costs decrease with the increase in the volume of production, and an
undertaking with a large volume of production is able to cover costs at a lower price than
smaller undertakings. The possibility to ensure lower costs, and thus lower prices, represents
an important source of competitive advantage on markets where price competition is the main
form of rivalry between undertakings.
What follows from the above is that economies of scale are characteristic of production
processes characterised by high fixed costs, which is a feature of electronic communications
markets. In other words, on the basis of the existing production capacities, that is, of the
existing infrastructure, every additional unit of service is produced at lower average fixed
costs per unit of service. HT has significant advantage over other operators from the point of
view of economies of scale because it may supply services at significantly lower costs than
other operators who have to build or upgrade the existing network infrastructure. Therefore,
potential operators who would like to enter the market would not be able to offer prices lower
than the ones offered by HT because of high service provision costs, and they would thus
have trouble attracting users on the market.
5.4. Economies of scope
Economies of scope are characterised by a decrease in average production costs which may be
achieved if an undertaking produces a certain number of closely related products. They occur
if total production costs of two or more products are lower than the production of these same
products in separate plants or undertakings. This represents an economy of savings on costs
achieved by a joint conduct of a large number of different activities within the same company
by using joint input or by joint upgrading of products or by their joint distribution.
.
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Economies of scope refer to an operator’s potential advantages achieved by offering different
products and services together. HT has developed its network over the years, and offers, in the
entire territory of the Republic of Croatia, through its widespread distribution network, a wide
spectrum of services to a large circle of users. Although it mostly provides a publicly
available telephone service, there is an increasing trend in the number of users to which it
provides broadband Internet access in the form of a MAXadsl service and IP television in the
form of MAXtv service. By being present in a large number of markets, HT has been using
the advantages offered by economies of scope.
In order to be compete with HT by enjoying the benefits of the economies of scope
themselves, other operators need to enter a large number of markets at the same time, which
increases their entry costs which they will not be able to recover once they decide or are
forced to withdraw from the market.
It may, therefore, be concluded that the existence of the economies of scope may represent
entry barriers for operators who are just entering or are planning to enter the market.
5.5. Lack of countervailing buying power
Countervailing buying power exists when an operator using a certain wholesale services
possesses such economic strength enabling it to respond to a price increase or to a threat of a
price increase of this wholesale service within a reasonable time in the manner that it starts
buying from another operator. The bigger the share of income earned by the operator from a
certain operator using the wholesale service in the total income from that wholesale service
the bigger the negotiating power and the ability of the beneficiary operator using the
wholesale service to impose its own interests and the possibility to threaten the market
position of the operator supplying the wholesale service.
As it was already mentioned, HT is the only operator supplying the wholesale service of
unbundled access to the copper-based local loop. Since no other operator supplies the
identical service, operators using the existing wholesale service do not have the adequate
countervailing buying power to be able to improve their negotiating position, better control
prices or some other business conditions and thus endanger HT’s market position on the
market of wholesale (physical) network infrastructure access (including shared or fully
unbundled access) at a fixed location.
5.6. Level of vertical integration
Vertical integration means that an operator is present at several different, vertically connected
wholesale and retail markets.
In accordance with the European Commission Guidelines, vertical integration is treated as
obtaining market power. Such an obtaining of market power is an attempt at squeezing out the
competition from a potentially competitive market or just creating problems for competitors
when entering the market. .
HT is a vertically integrated operator active also in the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location,
and on the retail broadband access market where it offers broadband Internet access service to
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end users over twisted copper pair. There is another company active in the retail broadband
access market Iskon Internet d.d., which is 100%-owned by HT. In this manner, and taking
into account the fact that HT disposes of network infrastructure in the entire territory of the
Republic of Croatia, vertical integration and control over infrastructure provide it with a key
advantage in relation to other operators in the retail market, in particular those to whom they
offer services on the retail market on the basis of the wholesale service of unbundled access to
the local loop thus enabling it to use significant market power in the wholesale market, in the
absence of regulation. In this manner, HT may, by creating barriers to wholesale access,
prevent new operators form providing a competitive retail service which consequently causes
a fall in their sale and income and the deterioration of their market position. Furthermore,
vertical integration and control of infrastructure would enable HT to apply price
discrimination and price squeeze. Considering all of the above, it may be concluded that new
operators, when providing their services, depend on HT to provide them with access to end
users.
As it may be concluded, a high level of vertical integration additionally strengthens HT’s
market position
5.7. Conclusion on the assessment of the existence of operators with
significant market power and the evaluation of effiectiveness of
competition
On the basis of the analysis, the Agency established that the relevant market of wholesale
(physical) network infrastructure access (including shared or fully unbundled access) at a
fixed location is not considered to be effectively competitive and that HT has significant
market power on this relevant market, or, in other words, that it has a dominant position,
meaning that it has such economic strength affording it the power to behave to an appreciable
extent independently of competitors, customers and ultimately consumers.
The Agency has concluded that HT enjoys significant market power on the basis of a high
market share which was stable in the observed period and amounted to 100%. Furthermore,
the Agency has supported the mentioned conclusion by other criteria referred to in Article 55
of the ECA, such as control of infrastructure where there are high barriers to the development
of infrastructural competition, economies of scale, economies of scope, lack of countervailing
purchase power, and the level of vertical integration. The Agency thinks that the analysis of
other criteria is not necessary, that is, that other criteria, in addition to the analysed ones,
would also lead to the conclusion that HT has significant market power on the relevant market
of wholesale (physical) network infrastructure access (including shared or fully unbundled
access) at a fixed location.
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6. Competition Problems
This chapter will focus on all possible competition problems that might occur on the relevant
market or markets in the absence of regulation. It will also deal with the best possible way of
imposing regulatory obligations that will most efficiently remove the noticed problems, which
should, in turn, lead to the removal of barriers to market entry and to the development of
competition in the market with the final objective to defend the interests of end users.
Pursuant to Article 56, paragraph 3 of ECA, regulatory obligations must be based on the
nature of the identified market problem, and must be proportionate and justified considering
the regulatory principles and objectives referred to in Article 5 of ECA.
A competition problem is any behaviour of an operator having significant market power
aimed at excluding the existing competitors from the market, preventing market entry to new
competitors or any behaviour contrary to interests of end users54
.
Since the procedure for imposing regulatory obligations, defined in a new regulatory
framework and ECA, does not presuppose that the exploitation of the status of significant
market power actually occurred, any competition problem may be observed as a potential
competition problem, that is, a problem the occurrence of which may be assumed under
certain circumstances.
Although possible competition problems have already occurred in the regulatory practice of
European countries, it is regarded that not all of the existing/already familiar problems may
automatically occur in any market and in any situation. The biggest difference between the
old regulatory framework and the Telecommunications Act and the new regulatory
framework and the ECA lies here. The old legislative framework automatically prescribed
that an SMP operator had all the obligations defined in the Telecommunications Act, without
having to prove that they were necessary. However, in accordance with the above-mentioned
Article 56, paragraph 3 of the ECA, a regulatory authority must conduct an analysis to
recognise all possible competition problems in order to prevent their occurrence in practice by
imposing justified regulatory obligations. As a result, the Agency thinks that regulatory
intervention, that is, the imposition of regulatory obligations always has to be based on
specific national circumstances established in the market analysis procedure (market
definition and the assessment of the efficiency of competition) referred to in Chapters 4 and 5
of this document.
There are three basic types of behaviour recognised in regulatory practice which create
competition problems. They are the following:
1. transfer of market power from one market in which an undertaking has significant
market power into an adjacent vertically or horizontally related market;
2. different behaviours of operators having significant market power that may be used to
keep significant market power in a certain market (erecting barriers to entry) and
3. behaviours that may be summed up under the name “textbook monopoly behaviour”.
54
Quote from Revised ERG Common Position on the approach to appropriate remedies in the ECNS regulatorey
framework; Final Version May 2006 (ERG (06) 33)
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Competition problems by definition refer to:„any behaviour of an operator having significant
market power” meaning that the recognition of possible competition problems mostly refers
to the discovery of situations in which behaviours of operators having significant market
power may be recognised. In order to be able to have a preventive influence on any behaviour
which has a negative impact on the development of competition and any behaviour contrary
to the interests of end users, regulatory obligations must influence and regulate the behaviour
of operators having significant market power. Therefore, regulatory obligations have,
according to the new regulatory framework and the ECA, been aimed at preventing certain
behaviours of operators. All of the above does not mean that certain problems in a market do
not result from structural and regulatory problems as well, which will also be taken into
account in the imposition of regulatory obligations.
In the previous text there have been identified three basic types of behaviour creating
competition problems. However, competition problems may also be observed from two basic
angles/dimensions, including:
• marked dimension and
• “cause-and-effect” type dimension.
.
6.1. Market dimension of competition problems
Four different cases have been recognised in regulatory practice in the context of market
dimension. They depend on the levels on which they take place. These are the following:
6.1.1. Vertical leveraging
Vertical leveraging refers to a situation in which an operator is present on several different
markets, or, more precisely, on a wholesale and a vertically related retail market.55. An
operator having significant market power in a certain wholesale market offers certain
wholesale services which are necessary for the provision of services in a downstream
vertically related retail market. The operator having significant market power may attempt to
leverage its market power from the market in which it has significant market power to a
potentially competitive retail market. If leveraging is successful, the operator will then have
market power on both, the wholesale and the retail market. This dimension differentiates
between 11 typical behaviours of SMP operators, which have been recognised in regulatory
practice, and defined in Chapter 6.3 of this document.
6.1.2. Horizontal leveraging
Horizontal leveraging is a situation in which an operator does business in different markets
which are not vertically related, and has significant market power on one of them. Under
certain circumstances, it may then try to transfer its market power from the market where it
has SMP to a potentially competitive market. Horizontal leveraging may occur between retail
55
An operator having significant market power may be present in two associated vertically related wholesale
markets.
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markets as well as between wholesale markets or between a wholesale and a, not vertically
related, retail market. This dimension differentiates between 2 typical behaviours of operators
having significant market power which have been recognised in regulatory practice, and
defined in Chapter 6.3 of this document.
6.1.3. Single market dominance
This case refers both to a potential wholesale, and a potential retail market. In this case, a
SMP operator may engage in different behaviours aimed at erecting barriers to entry into the
market in order to protect its significant market position or it may engage in textbook
monopoly behaviour in order to preserve its position of significant market power. All these
procedures influence interests of end users in the end. This dimension distinguishes between
10 typical behaviours of operators having significant market power which have been
recognised in regulatory practice, and defined in Chapter 6.3 of this document.
6.1.4. Call termination
This dimension, although it contains typical behaviours defined in the three above-mentioned
cases, deserves a special section because termination markets are markets of a different nature
than other markets. Termination markets refer to a situation of two-way access in which two
or more networks provide the same services and they must interconnect so that their end users
may communicate. In this situation different operators negotiate interconnection agreements
at the wholesale level. After having agreed upon wholesale interconnection conditions, they
set their prices on the retail market where they may or may not be competitors (fixed and
mobile networks operators). As it was already mentioned, due to a specific nature of
termination markets, typical behaviours, that is, competition problems in the other above-
mentioned cases, have also been dealt with in this case. This dimension differentiates between
10 typical behaviours of operators having significant market power which have been
recognised in regulatory practice, and defined in Chapter 6.3 of this document. However,
some other behaviours or competition problems defined in the first three cases are possible in
termination markets as well.
6.2. Cause-and-effect type of dimension of competition problems
The second dimension that needs to be taken into account in relation to operator behaviour or
possible competition problems is the cause-and-effect type dimension. Every competition
problem, that is, certain behaviour of the operator having significant market power has a
specific goal, or, in other words, every behaviour is a cause leading to a certain effect on the
market, on existing and potential competitors or on end users.
The cause-and-effect type dimension is a different way of looking at competition problems
and it helps with the dynamic, time-related understanding of consequences of certain
competition problems, that is, of the behaviour of SMP operators.
The cause-and-effect dimension in the regulatory practice is made up of the following
elements:
a) Strategic variables: price, quality, time, information etc.
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b) Behaviour: price discrimination, quality discrimination, delaying tactics, withholding
of information, etc
c) Consequences raising rivals’ costs, restriction of competitors’ sales, margin squeeze,
foreclosure, etc.
6.3. Overview of competition problems recognised in the European
practice
As it was already mentioned, competition problems refer to certain behaviours of operators
with significant market power.
According to ERG (06) 33 document, there are 27 usual competition problems which have
been identified in European regulatory practice. Most of the problems identified are based on
experiences of regulatory authorities and reflect electronic communications markets reality.
However, there is nothing preventing a regulatory authority from identifying possible
competition problems outside the set framework, which are specific for a certain country or a
certain market.
Bearing in mind what was already dealt with in the previous chapter, that is, market and
cause-and-effect type dimension of competition problems, that is, of the behaviour of
operators, below is a list of 27 standard competition problems which have been identified in
practice. This list contains both the market and the cause-and-effect dimension in the part
mentioning strategic variables and behaviour of operators.
Standard competition problems according to market dimension and behaviour of operators are
the following:
Vertical leveraging
• refusal to deal/denial of access
• discriminatory use or withholding of information
• delaying tactics
• bundling/tying
• undue requirements
• quality discrimination
• strategic design of product
• undue use of information about competitors
• price discrimination
• cross-subsidisation
• predatory pricing
Horizontal leveraging
• bundling/tying
• cross-subsidisation
Single market dominance
• strategic design of product to raise consumers’ switching costs
• contract terms to raise consumers’ switching costs
• exclusive dealing
• over-investment
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• predatory pricing
• excessive pricing
• price discrimination
• lack of investment
• excessive costs/inefficiency
• low quality
Call termination
• tacit collusion(i)
• excessive pricing
• price discrimination
• refusal to deal/denial to interconnect
In order for the regulatory authority to be able to chose those regulatory obligations that will
best resolve the identified competition problems in the relevant market/s, the principal thing is
to find the cause, that is, the source of the operator’s significant market power. According to
the Agency’s opinion, the cause or source of an operator’s significant power indicates the
existence of certain competition problems in the absence of regulation.
By means of a timely reaction and adequately imposed regulatory obligations a regulatory
authority may influence and prevent the transfer of significant market power to neighbouring
markets and the erecting of barriers to entry, and thus directly assist market entry and
development of market competition. In those markets were market entry of new operators is
less likely and where market power remains/resists due to the first mover advantage56
, a
regulatory authority must protect the users from behaviours which are against interests of end
users and from the inefficiency of the operator with significant market power.
It may be concluded from all of the above that the selection of the adequate regulatory
obligation and the recognition of the cause of the problem demand an overview of the total
situation on markets and determination of the source of significant market power along with
the definition of possible structural and regulatory problems, which was, as it was already
stated, established in the market analysis procedure (identification of the market and
assessment of the effectiveness of competition).
6.4. Competition problems on the market of wholesale network
infrastructure access (including shared or fully unbundled access) at a
fixed location
In the process of identification of possible competition problems in the relevant market, the
Agency shall take into account all possible problems already identified in the European
practice the occurrence of which is, without regulation, possible in the relevant market. It will
elaborate them in detail and, on the basis of this chapter, impose regulatory obligations in
Chapter 7 of this document. These regulatory obligations will, in accordance with principles
of previous regulation, serve best to solve the mentioned market problems and be in
compliance with Article 56, paragraph 3 of the ECA.
56
(eng. First mover advantage)
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On the basis of what has been said in this Chapter, and based on market definition and the
assessment of the effectiveness of competition and the identification of the operator with
significant market power, taking into account the criteria which have proven the existence of
significant market power, the Agency believes that competition problems might occur in the
relevant market in the absence of regulation. These problems would mostly refer to vertical
leveraging.
According to the ERG (06) 33 document, there are three strategies for vertical leveraging:
• Refusal to deal/denial of access
• Leveraging by means of non-price variables
• Leveraging by means of pricing
The Agency has, therefore, classified competition problems in the relevant market of
wholesale (physical) network infrastructure access (including shared and fully unbundled
access) at a fixed location according to the above-mentioned classification. Every competition
problem deemed by the Agency to be possible without regulation has been dealt with
separately in the following chapters.
The Agency distinguishes between two types of competition problems: those which have
already happened in practice in markets defined by the TA and those competition problems
which might happen in the relevant market which is the subject of this document, without
regulation, that is, competition problems that might occur if the Agency did not regulate the
market where there are operators with significant market power.. When imposing regulatory
obligations, in accordance with ERG document (06) 33, the Agency did not differentiate
between the above-mentioned two types of competition problems and it has imposed
regulatory obligations accordingly. In other words, when imposing regulatory obligations it
does not matter if a certain problem occurred in practice or if the Agency envisaged the
possibility of a certain problem occurring in the future.
6.4.1. Refusal to deal/denial of access
In the European case-law, refusal to deal does not refer only to a situation in which an
operator having significant market power absolutely refuses to offer/provide a wholesale
service but also to a situation in which the SMP operator is willing to provide the service but
on unreasonable terms.57
. This part deals only with outright refusal to deal/denial of access,
while refusal to negotiate on reasonable terms is dealt with together with other competition
problems such as unreasonable demands, excessive pricing etc.
A SMP operator on the wholesale market may attempt to leverage its market power by
denying access to or refusing to deal with undertakings operating downstream and competing
with the incumbent’s retail arm or affiliates. Such behaviour can create competitive harm
when an operator with significant market power controls a service which is essential for other
operators to be able to provide services to end users on a downstream retail market.
The Agency thinks that, without regulation, a SMP operator might feel, for the purpose of
vertical leveraging, a strong need to deny access to its network and refuse to deal with the
57
ERG document, ERG (06) 33
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existing or potential competitors using this wholesale service to provide services on a
downstream retail market. A vertically integrated operator having significant market power
on a relevant market might deny access to services included in the market dimension58
, which
would result in the fall in the retail market share of existing operators who depend on the SMP
operator’s wholesale service to supply services on the retail market thus preventing the entry
of new operators.
Having concluded in Chapter 5.7 of this document that HT is the operator with significant
market power in the Republic of Croatia and a vertically integrated operator, the Agency
thinks that HT could, without regulation, have interest in supplying operators with the
wholesale service of unbundled access to the local loop and the collocation service on
unreasonable terms, or not even offer access to the local loop and sub-loop and the collocation
service.
This would allow HT to vertically leverage its significant market power to a downstream
retail market thus strengthening HT’s market position at the retail level since operators who
are currently using the service of unbundled access to the copper-based local loop could not
compete with HT in the provision of fixed network access and convergent broadband Internet
access. This is because, as it was already mentioned in Chapter 5.2 of this document, HT’s
access network cannot be replicated in the time period covered by this analysis. Also, all
operators’ investment would be lost thus making a negative impact on operators using the
wholesale service in question and forcing them to withdraw from the market which, in turn,
would have a negative impact on competition.
Furthermore, without regulation of new generation networks, HT could deny access to the
local copper sub-loop or access to the fibre loop by means of point-to-point link, which would
result in the leveraging of significant market power and strengthening of HT’s market position
at the retail level of the provision of service of broadband Internet access and access to the
fixed network, and it might result in withdrawal of other operators from the market and
restoration of HT’s monopoly.
.
Therefore, without regulation of access to he local loop and the local sub-loop, regardless of
the applied technology, the existing and potential competitors would not be able to provide
the services of broadband Internet access at the retail level or access to fixed network, and in
the future the service of IP television, or differentiate these services significantly in the terms
of technical features, quality and price from the equivalent services provided by HT. In other
words, the Agency thinks that the existing and potential competitors do not enjoy sufficient
negotiating power to be able to force HT to provide access on reasonable commercial terms or
even to provide the service of access to the local loop and sub-loop and the collocation service
at all.
Consequently, the denial of access to unbundled access to the copper-based local loop and the
refusal to negotiate and provide access based on new generation networks would result in the
increase in costs of other operators, the inability to effectively compete with HT’s retail arm
and its affiliated companies, the leveraging of HT’s significant market power onto a retail
market and, finally, to the withdrawal of operators using this wholesale service from the
market.
58
Defined in Chapter 4.3. of this document
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In conclusion, it must be emphasised that, if the operators were not able to provide at the retail
level a service based on the service of unbundled access to the local loop, this would have a
negative impact on end users who would not have the option to choose between prices,
quality and services offered to them
6.4.2. Leveraging by means of non-price variables
6.4.2.1. Discriminatory use or withholding of information
This part deals with a competition problem which refers to a situation in which an operator
with significant market power in a wholesale market provides information important for the
provision of retail services to its retail arm or affiliate undertakings but withholds information
from operators using or intending to use the SMP operator’s wholesale service on the basis of
which they provide/wish to provide retail services competitive to services provided by the
SMP operator’s retail arm, that is, its affiliates. This problem also refers to a situation in
which an operator having significant market power withholds some other information
important for the use of the wholesale service. By behaving in this manner, the operator with
significant market power leverages its dominant position to the retail level by placing
operators beneficiaries of the wholesale service into an unfavourable position in relation to its
own retail arm, that is, to its affiliates.
The Agency thinks that HT, as the operator with significant market power on the wholesale
market of (physical) network infrastructure access (including shared and fully unbundled
access) at a fixed location and a vertically integrated operator, might, without regulation,
withhold important information from operators using or intending to use the wholesale service
of unbundled access to the local loop by not providing them with information as detailed as
information provided to its retail arm or affiliated companies. It might also not provide
information in time for the operator using the mentioned wholesale service to react at the
retail level and compete with its retail arm disposing of the necessary information.
Furthermore, investments into new generation networks result in the opening of new points of
access and the Agency thinks that HT might, without regulation, withhold detailed and timely
information on planned changes in the network from its existing and potential competitors,
which would have a negative impact on business plans and investments of these operators
because they would not be able to estimate the impact of such changes on time and consider
different possibilities of investing into their own network or timely react at the retail level. In
this manner, HT could abuse the first mover advantage and place its own retail arm and
affiliated companies into a more favourable position at the related retail market than the
existing and potential competitions. In other words, it might leverage its market power to the
downstream retail market thus strengthening its market position and having a negative impact
on effective competition at the retail level.
6.4.2.2. Delaying tactics
By applying delaying tactics the operator having significant market power does not refuse to
provide a certain wholesale service but provides this service later than to its own retail arm or
affiliated companies thus placing the existing and potential competitors to a disadvantage at
the downstream retail level. These tactics refer to delaying of negotiations on the provision of
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a wholesale service or by lying about certain technical problems with the provision of this
service.
The Agency thinks that HT, as the operator having significant market power on the market of
wholesale (physical) network infrastructure access (including shared and fully unbundled
access) at the fixed location and a vertically integrated operator, might, in the absence of
regulation, delay the provision the relevant wholesale service to its downstream existing and
potential competitors as opposed to the provision of the same service to its own retail arm or
affiliated companies.
Moreover, the former behaviour of HT, which was also recognised during control), shows that
the existing of regulation does not prevent HT from establishing the service of unbundled
access to the local loop and the collocation services within longer deadlines than for the
provision of this service to its affiliated company, meaning that regulatory obligations in this
area need to be strengthened since HT might continue to abuse its significant market power.
In this manner HT has been strengthening its market position in the provision of broadband
Internet access and access to the fixed network at the retail level since its retail arm or
affiliated company are able to offer to the end user the service of broadband Internet access,
that is, access to the fixed network sooner than to other operators influenced by HT’s
behaviour at the wholesale level who need the relevant wholesale service to be able to provide
services at the downstream retail market. Furthermore, the application of delaying tactics at
the relevant wholesale market would allow HT to continue to maintain its market share at the
downstream retail market, i.e., in the provision of services of broadband Internet access and
access to the fixed network.
By developing new generation networks and by fully or partially replacing twisted copper
pairs with optical fibre, HT might, without regulation, apply delaying tactics by not providing
wholesale service of unbundled access to the local loop, that is, the service of unbundled
access to the PTP fibre loop while at the same time offering more quality and equivalent
services based on new generation networks at the retail level. In this manner, HT might have
the possibility to profit from the first mover advantage at the retail level before the
introduction of the adequate wholesale services because it would be the only operator able to
offer more advanced services of better quality to a large number of users thus leveraging its
market power from the wholesale to the downstream retail market. Such behaviour would
strengthen HT’s market position in a related retail market which might eventually lead to the
restoration of monopoly.
6.4.2.3. Undue requirements
Undue requirements refer to all those terms in the contract on access to the unbundled local
loop which are unnecessary for the provision of the service in question. Such requirements
unreasonably increase costs and waste time of the current and potential competitors using the
wholesale service to provide services at the retail level where they compete with the retail arm
or an affiliated company of the operator with significant market power. The SMP operator
might, without regulation, abuse various forms of undue requirements to influence business
decisions and costs of the current and potential competitors.
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The Agency thinks that HT, as the SMP operator on the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location
and a vertically integrated operator, might, without regulation, impose various forms of undue
payment securing instruments in terms of conditions and the amount on operators using or
intending to use the HT’s wholesale service for the provision of services at the retail level
where they compete with the retail arm or the affiliate company of the SMP operator. It might
also unduly encourage the using of more expensive technologies (e.g. type of wiring) for the
provision of the wholesale service or impose the selection of contractors for the realisation of
collocation space, in order to increase costs of the existing and potential competitors, which
would lead to vertical leveraging of HT’s market power to the downstream retail market.
HT might also ask for information necessary for the provision of the wholesale services, such
as, for example, information about target end users, but more than necessary, that is,
information which is not economically and technically justified for the provision of this
service. Such information about end users might be used by HT to design such a service that
would attract this end user and again result in the market power being leveraged to the related
retail market and to the strengthening of HT’s market position.
.
6.4.2.4. Undue use of information about competitors
This refers to all possible behaviours of the SMP operator in which the operator uses data
provided by the potential and existing competitors at wholesale or retail level in the context of
provision of wholesale services and to the use of such information to increase rivals’ costs or
decrease earnings in a vertically related wholesale or retail market.
Without regulation, HT might ask for certain information from its potential or current
competitors and use them for the benefit of its retail arm or affiliated companies by preparing
special terms for certain end users in order to motivate them not to change the operator, which
might lead to a reduction in retail income of competitors because the end users will give up
the idea of switching or to the increase of competitors’ costs (for example, additional
marketing costs to attract users).
In this manner, HT would be in advantage before other competitors by abusing its significant
market power on the wholesale market which is the subject of this document and extend it to
the downstream retail market and in this manner, eventually, cause the increase in costs of
other operators, business problems and a probable withdrawal from the market
6.4.2.5. Quality discrimination
Competition problems by means of quality discrimination may occur in cases in which an
operator with significant market power influences the raising of costs of the existing or
potential competitors or the restriction of sales at the retail level by placing them at a quality
disadvantage. Without regulation, an operator with significant market power might use quality
discrimination by supplying a wholesale service necessary for the provision of a retail service
with quality parameters lower than the service supplied to its retail arm or affiliated
companies.
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By means of quality discrimination, an operator having significant market power has a direct
influence on the quality of service provided to end users. Since the user is particularly
sensitive to the quality of service, this results in dissatisfaction and the loss of confidence of
end users in the operator providing the service. Furthermore, the quality of service is an
important factor in the optimization and rationalisation of an operator’s costs.
The Agency thinks that HT, as the SMP operator on the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location
and a vertically integrated operator, might, without regulation, in different ways influence the
quality of services and the removal of possible malfunctions in the provision of the relevant
wholesale service and related contents (e.g. access lines, transfer cables, power supply etc.).
HT, might, thus delay with the repair of malfunctions in the provision of the service of
unbundled access to the local loop or sub-loop regardless of the applied technology.
Furthermore, if the service is provided to the end user by means of a cable which may not
ensure the adequate quality, and the user is complaining about the quality of the service,
without regulation, HT might re-establish the service of better quality by replacing cables
sooner if it was its own user than in case of the user using the service of another operator on
the basis of HT’s wholesale service.
Such behaviour leads to the following consequences: the existing or potential competitors lose
the confidence of end users, which might result in the termination of contracts and the lower
profits of operators on the retail market. As a result, HT might extend its significant market
power and strengthen its position in a vertically related retail market, which would lead to the
lack of effective competition at a disadvantage of end users.
.
6.4.2.6. Other types of discrimination currently defined in the Annex to the Reference
Offer for the service of unbundled access to the local loop
According to the Agency, this kind of discrimination includes discrimination in relation to
technical requirements or management or maintaining the access service. The Agency thinks
that HT might, without regulation, be able to discriminate competition in other ways currently
defined in the Annex to the Reference Offer of for the service of unbundled access to the local
loop.
Although the previously mentioned types of discrimination have not been mentioned among
the 27 standard competition problems which have been identified in practice according o the
ERG document (06) 33, the Agency thinks that, without regulation, HT would be able to
discriminate other operators in other non-price related ways.
6.4.3. Leveraging by means of pricing
6.4.3.1. Price discrimination
This competition problem refers to a situation in which an operator with significant market
power charges a different price for a wholesale service necessary for the provision of a certain
retail service to its retail arm and affiliated companies than to the existing and potential
competitors in a related retail market.
.
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The Agency thinks that HT, as the SMP operator on the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location
and a vertically integrated operator, might, without regulation, by means of price
discrimination, offer the wholesale service of unbundled access to the local loop or sub-loop
(regardless of the applied technology) to rival operators in a related retail markets by charging
them a price which is higher than the price charged to its retail arm or affiliated companies..
Such HT’s behaviour might influence business results of other operators using the wholesale
service in question to provide broadband Internet access services and fixed access services on
a related retail market
By charging a price which is higher than the one charged for the same service to its retail arm
or affiliated companies, HT might extend its market power to a vertically related retail
market. In other words, this would allow HT to supply the service at a certain retail price
through its retail arm or affiliated companies. In this case, in order to be competitive, other
operators would have to supply the same service at the same, or even lower, price in which
case they would not be able to make profit and in some cases they would not even be able to
cover retail costs in addition to wholesale costs. In other words, the level of retail prices that
other operators would have to compete with together with the set wholesale prices would lead
to a price squeeze, that is, it would in the long run result in the lack of effective competition
and withdrawal of other operators..
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6.4.3.2. Cross subsidisation
This competition problem refers to a situation in which there are two different markets and
two different prices in these markets. Without regulation, the SMP operator may, in the
market in which it has this position, charge a price above costs in order to be able to offer
below-cost retail prices. This would result in price squeeze and, consequently, lead to the
leveraging of significant market power from the wholesale market to the downstream retail
market.
The Agency thinks that HT, as the operator having significant market power on the market of
wholesale (physical) network infrastructure access (including shared or fully unbundled
access) at a fixed location and a vertically integrated operator, might, without regulation, offer
the wholesale service of unbundled access to the local loop or sub-loop (regardless of the
applied technology) above costs and thus and thus increase costs of operators using this
service while at the same time offering broadband Internet access service and access to fixed
network at below-cost retail prices.
Such HT’s behaviour would lead to price squeeze and make other operators using the relevant
wholesale service to suffer losses in order to be able to provide services at downstream
markets and this would, eventually, force them to withdraw from the market. On the other
had, HT would be able to extend significant market power from the market of wholesale
(physical) network infrastructure access (including shared or fully unbundled access) at a
fixed location to the downstream retail market and strengthen its market position, which
would have a negative impact on effective competition
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7. Regulatory Obligations of the SMP Operator
Should the Agency, in the process of identification and analysis of the market referred to in
Article 54 of the ECA, establish that the market is not effectively competitive, it shall adopt a
decision determining the operator with significant market power in this market pursuant to
Article 55 of the ECA. By this decision it shall impose, keep or amend certain regulatory
obligations referred to in Articles 58 to 65 of the ECA. These obligations are the following:
• Obligation of transparency
• Obligation of non-discrimination
• Obligation of accounting separation
• Obligation of access to, and use of, specific network facilities
• Price control and cost accounting obligations
• Regulatory control on retail services
• Minimum set of leased lines
• Carrier selection and pre-selection
The Agency shall impose regulatory obligations on the operator having significant market
power on the basis of the existing and potential competition problems defined in Chapter 6 of
this document in order to prevent the SMP operator from abusing the position of significant
market power and from influencing effective competition as defined in Chapter 6 of this
document..
Regulatory obligations imposed pursuant to the ECA must be based on the nature of the
identified market problem, and must be proportionate and justified considering the regulatory
principles and objectives referred to in Article 5 of the ECA. The Agency must impose at least
one regulatory obligation on every SMP operator.
The Agency thinks that the principle of proportionality would be best satisfied if every SMP
operator is imposed those regulatory obligations that will best serve to eliminate the existing
and potential competition problems, that is, that every SMP operator is imposed the obligation
it deserves on the basis of its significant market power.
7.1. Regulatory obligations imposed on the SMP operator on the market of
wholesale (physical) network infrastructure access (including shared
or fully unbundled access) at a fixed location
Having identified and elaborated in detail in Chapter 6.4 all possible competition problems
that might occur, without regulation, on the relevant market of wholesale (physical) network
infrastructure access (including shared and fully unbundled access) at a fixed location in the
time period covered by the analysis, the Agency will in the following text impose those
regulatory obligations that, according to the principles of ex-ante regulation, it deems best for
the solution of the mentioned competition problems pursuant to Article 56, paragraph 3 of the
ECA
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On the market of wholesale (physical) network infrastructure access (including shared and
fully unbundled access) at a fixed location the Agency shall impose the following regulatory
obligations on the company HT as the operator with significant market power:
• Obligations of access to, and use of, specific network facilities;
• Obligation of non-discrimination;
• Obligation of transparency together with the obligation to publish the reference offer
for the unbundled access to the local loop and related facilities;
• Price control and cost-accounting obligations;
• Obligation of accounting separation.
7.1.1. Obligation of access to, and use of, specific network facilities59
The Agency may, in accordance with the provisions of Article 56 of the ECA, impose on
operators the obligations to satisfy the justified requirements for access to, and use of, specific
network facilities and the related infrastructure and equipment. The Agency may impose this
obligation particularly where it considers that denial of access or any other unreasonable
terms and conditions or restrictions having a similar effect would hinder the emergence of a
sustainable competitive market at the retail level, or would not be in the end-user’s interest.
The Agency may also specify additional requirements concerning the fulfilment of the
principles of fairness, reasonableness and timeliness.
The Agency thinks, as it was described in Chapter 6.4.1 of this document, that denial of
access or any other unreasonable terms and conditions or restrictions having equivalent effect
would hinder the emergence of a sustainable competitive market at the retail level, or would
not be in the end-user’s interest.
The Agency has also, on the basis of reports of violations of the provision of the relevant
reference offer and numerous other complaints of operators and end users on the market,
established that alternative operators are faced with many difficulties in practice (e.g.
preventing access to information about the existence of a device for multiple use of twisted
copper pair in the access network, calculating additional dependent costs, calculating
unreasonably high material costs, manner of charging power use, unfounded denial of
requests for access to the unbundled local loop, that is, without adequate tests, delay with the
unbundling of loops, delay with removing malfunctions, delay with establishing collocations,
that is, with dealing with consumer complaints), which is another reason for the imposition of
this obligation to create effective competition
For that reason, the Agency thinks that it is necessary to, in order to avoid the behaviour of
SMP operators defined in Chapters 6.4.1 and 6.4.2.2 of this document and all similar
problems which have not been explicitly defined, impose on HT the obligation to satisfy the
due requirements for access to, and use of, specific network facilities and the related
infrastructure. For the purpose of imposing this obligation and pursuant to Article 61,
paragraph 3 of the ECA, the Agency imposes on HT the following:
• To allow to a third party unbundled access to the local loop and sub-loop covered in
the market definition referred to in Chapter 4.3 of this document, and access to related
facilities necessary for full and shared access to the local loop, or, sub-loop;
59
Article 12 of the Access Directive
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• to negotiate in good faith with operators requesting access and, as part of this
obligation, to reply to every reasonable request;
• not to withdraw the already granted access to facilities;
• to ensure the sharing of space or some other forms of sharing of electronic
communications infrastructure and associated facilities, including, in particular, the
sharing of cable ducts, buildings and other facilities and their entrances;
• to provide access to operational support systems or similar software systems necessary
to ensure fair competition in the provision of services.
When imposing obligations referred to in Chapter 61, paragraph 3 of the ECA, as part of the
obligation to provide access, the Agency has made sure that the mentioned obligations are
proportionate to the regulatory principles and objectives referred to in Article 5 of the ECA,
that is, it has taken into account the criteria laid down in article 61, paragraph 5 of the ECA.
The Agency thinks that, considering the level of market development, the service of
unbundled access to the local loop and all other proposed obligations are technically and
economically completely feasible taking into account operator’s available capacities. Thus,
for example, when imposing the obligation to provide the service of fully unbundled access to
the local loop and the local sub-loop, Agency has considered whether this obligation is
technically and economically feasible and it has taken into account the available capacity,
which was supported in the text of the analysis of the relevant market.
The Agency also thinks that long-term protection of competition is ensured by means of rights
and obligations of all operators on the market prescribed in the ECA and other laws and
bylaws (e.g. ordinances, Civil obligations Act) and in reference offers. Every operator thus
has an equal chance to recover initially invested funds after a certain period of time, which is
obvious in the imposition of service of unbundled access to the fibre-based local loop where
the Agency recognised that the wholesale price for unbundled access to the fibre-based local
loop must, in addition to the cost, contain a reasonable rate of return, pursuant to Article 56,
paragraph 3 of the ECA.
In order to resolve the problems described in Chapter 6.4.1 of this document, pursuant to
Article 61, paragraph 3, items 1 and 2 of the ECA, the Agency has imposed on HT the
following obligation:
• to give to other operators access to the unbundled copper-based local loop and sub-
loop and access to unbundled fibre-based local loop based on the point-to-point link
and access to associated facilities necessary for full or shared unbundled access to the
local loop, or sub-loop;
• to negotiate in good faith with other operators requesting access in the manner that it
has to reply to every reasonable request.
HT must assess whether the request is reasonable in accordance with the obligation of non-
discrimination which is also dependent on technical characteristics of its own network.
Access to the unbundled local loop must be provided in two ways:
1. HT must in those locations where it unbundled the local loop for the purpose of self-
supply, that is, where it installed its outside cabinet, while preserving network
integrity, ensure space for the realisation of the service of unbundled access to the
local sub-loop, meaning that HT must ensure space for the termination of the
operator’s intermediary cable. This is equivalent to ensuring space on MDF in case of
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service of unbundled access to the local loop. In the vicinity of HT’s cabinet, the
operator may install its own street cabinet in accordance with all previously obtained
approvals and licences. The operator must also ensure the connecting of the mentioned
street cabinet to the power supply network in order to charge its active equipment
(VDSL2 transfer technology) installed in the cabinet. The operator must also ensure
the connecting of the mentioned equipment to its core network in which case HT must
ensure the sharing of ducts, that is, it must allow access to the street cabinet or some
other concentration point via telecommunications distribution channels pursuant to
Article 30 of the ECA and the Ordinance on the manner and conditions of access to
and use of electronic communications infrastructure and associated facilities60
. If there
is no space in ducts, HT must lease dark fibre to the operator. If there is no available
dark fibre, HT should ensure access on the basis of wavelength (WWDM access) over
fibre used by HT for self-supply in order to connect the operator’s active equipment to
the network.
2. HT must allow the operator to, on the basis of its business decisions based on
expertise to install a street cabinet at some point of HT’s access network although HT
does not have or does not plan to install its street cabinet on that same point. The
location where the operator will install the street cabinet must comply with technical
requirements, and the equipment to be installed in the mentioned cabinet must
completely ensure network integrity, that is, it may not cause the degradation of
services provided from the local exchange.
In this manner preconditions will be created for some users to get the type of broadband
services they would not otherwise be able to get, and this will ensure the expansion of the
offer of broadband services to a greater number of users, stimulate investments into the access
segment of the network and contribute to further liberalisation of the electronic
communications market in the Republic of Croatia. Therefore, in cases when the replacement
of the twisted copper pair by optical cable in the access part of the network is not
economically justified, it is to be expected that the introduction of new broadband services
will be based on the concept of the shortening of the twisted-pair copper wire or twisted-pair
cable and the replacement by optical cable to the street cabinet or some other concentration
point, which will allow other operators to use this concept and, whilst preserving network
integrity, offer more advanced, quality and innovative broadband services where it is
economically justified. All related costs and all necessary approvals and licences for the
building of the cabinet are borne by the operator who applied for such an intervention in the
access network. This is a way of allowing users with long local loop to use quality broadband
services. The Agency thinks that, if this issue is not regulated in the appropriate manner,
significant transmission capacity will remain unused and many users will not be satisfied with
the quality of offered services.
The Agency has also imposed on HT, pursuant to Article 61, paragraph 3, item 3 of the ECA,
the obligation not to withdraw the already granted access to the local loop because the
withdrawal of the already granted access could result in damage and increase in costs of
operators using the service of unbundled access to the local loop and, eventually, to the
leveraging of HT’s significant market power to the downstream retail market.
60
OG 154/2008
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Furthermore, HT may not withdraw the already granted access unless the operators have
agreed upon some form of migration. In case of lack of agreement between operators, HT
must notify the operators and the Agency at least five years in advance the intention to
completely remove the existing access network so that the operators could have enough time
to plan alternative access to the end user. This is necessary to preserve the continuity of
service provision by the operator and the possibility of the operator to continue competing in
the market and in the NGA environment.
Furthermore, the Agency imposes on HT, pursuant to Article 61, paragraph 3, item 6 of the
ECA, the obligation to ensure collocation and other forms of sharing of electronic
communications infrastructure and associated facilities, including, in particular, the sharing of
ducts, premises and other buildings and their entrances.
Since the service of collocation is a precondition for access to the unbundled local loop61
, HT
must ensure the collocation and other capacities necessary for adequate installation and
connecting of the relevant equipment enabling the use of the service of unbundled access to
the local loop. Collocation means the provision of the service of leasing of physical space and
technical facilities necessary to reasonably accommodate and connect the relevant equipment
of the beneficiary to be able to use the service of unbundled access to the local loop. The
service of collocation allows an operator to access a certain unbundled local loop at requested
locations of the main distribution frame in the manner that the operator accommodates the
necessary equipment for distribution or concentration of traffic. In accordance with the above-
mentioned obligation, HT must allow beneficiaries to choose the type of collocation whereby
HT must take into account requests of operators which may be denied only on the basis of
justified and transparent reasons. The provision of collocation services will depend on the
availability of space in HT’s premises, or, on HT’s land.
HT currently provides the service of collocation that will allow beneficiaries the unbundled
access to HT’s local loop at requested locations of HT’s main distribution frame in one of the
following ways:
1. Physical collocation:
• In separate collocation premises in the building of HT’s main distribution
frame,
• Outside the building in a street cabinet but on HT’s land where HT’s main
distribution frame is located, and
• In the room of HT’s main distribution frame (under special safety
requirements);
2. Distant collocation – collocation in premises or street cabinets which have been
installed or rented by the beneficiary on public or private property near the location of
HT’s main distribution frame;
Virtual collocation – collocation at HT’s premises, and in this case HT is the only one that
is authorised to accommodate, install, maintain and run the beneficiary’s equipment
necessary for the service of unbundled access to the local loop, and the beneficiary is not
authorised to access the relevant equipment .
Since the Agency imposed on HT the obligation not to withdraw the already granted access to
equipment, HT must still continue to offer this type of collocation. If physical or virtual
collocation requested by the beneficiary is not possible at the requested location of the main
61
Covered by the market definition referred to in Chapter 4.3 of this document.
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distribution frame, HT may refuse the operator’s request for physical or virtual collocation but
in this case, HT must offer to the beneficiary the use of distant collocation.
Furthermore, HT must provide the service of collocation for the purpose of access to the local
sub-loop under conditions which are equivalent to those in case of the service of unbundled
access to the local loop. Also, in case of collocation for the purpose of access to the local sub-
loop, as it was already mentioned in this Chapter, HT must ensure the sharing of ducts, that is,
provide access to the street cabinet or some other concentration point via distribution channels
pursuant to Article 30 of the ECA and the Ordinance on the manner and conditions of access
to and sharing of electronic communications infrastructure and associated facilities. If there is
no space in ducts, HT must rent dark fibre to the beneficiary. If there is no available dark
fibre, HT must ensure access on the basis of wavelength (WWDM access) over fibre used by
HT for self-supply and for the purpose of connecting the beneficiary’s active equipment to the
network. The ensuring of access to the sub-loop will allow those operators who are building
their own networks to get even closer to the end user thus stimulating network investments. In
this manner, the Agency wishes to increase investments into the existing network
infrastructure, that is, encourage innovations in access technology and indirectly strengthen
the development of electronic communications networks thus ensuring to end users the
possibility of choice among operators providing broadband and voice services.
Furthermore, in case of physical collocation, HT must make sure that the beneficiary has the
same source of power supply as HT itself, that is, as its affiliated companies (depending on
the availability of resources, HT will ensure the maximum energy consumption requested by
the operator). For installations connected with AC, HT should ensure equally continuous
power supply as for HT’s equipment on that location.
As part of the obligation to provide collocation, HT must offer to beneficiaries the smallest
available space for physical and virtual collocation adequate for the appropriate installation of
devices needed by the beneficiary considering its request. This obligation will prevent the
incurring of unnecessary costs resulting from the use of more space than actually needed by
the beneficiary.
Furthermore, HT must ensure to beneficiaries undisturbed access by their own intermediary
cable between the main distribution frame and the intermediate distribution frame in which
case the cable in question must be made and installed in compliance with the valid laws and
regulations in the electronic communication sector and in accordance with all relevant
recommendations of the International Telecommunications Union and the European
Telecommunications Standards Institute (ITU Recommendation L.19, IEC standard 62255),
and in order to maintain the integrity of the electronic communications networks. The
intermediary cable must have electrical characteristics equivalent to those of HT’s cable
connecting DSLAM to MDF; meaning xDSL cable construction (at least cable of type xDSL-
30 MHz), with a screen for inside installation in case of collocation in a building, that is,
outside installation in case of distant collocation. In the latter case, the cable capacity should
not exceed 300 pairs. The contractor and the equipment may be selected by the beneficiary
himself while HT is responsible for supervision over works. The beneficiary will be
responsible for the functioning of its transmission capacities and equipment and the for the
functioning of services in this new system, and the beneficiary must take justified and
necessary steps in its operational and implementation procedures to ensure that the system:
• Does not endanger the safety and health of employees or end users of the other party
or of third parties,
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• Does not damage, disturb or cause the deterioration of quality in the functioning of the
system of the other part or of third parties.
The Agency finds this obligation necessary to prevent the leveraging of HT’s significant
market power to the downstream retail market because in this manner operators have the
possibility of choice among several options and thus may influence their own costs. This also
prevents the linking of collocation services with HT’s exclusive right to procure, deliver and
install the intermediary cable. The Agency thinks that this measure is justified on the market
since HT, when connecting operators who have their own collocation space, used to charge
them costs which were not proportionate to the real price of cables, and to the prices of the
related works. In this manner the Agency is trying to prevent the incurring of unnecessary
costs to other operators, or, in other words, behaviour described in Chapter 6.4.2.3 of this
document, concerning undue requirements and, thus consequently ensuring the increase of
competitiveness on the retail market.
Furthermore, for all works on the realisation of collocation premises (installation of cables)
for which HT uses external contractors, HT must allow the operator to choose the contractor
(HT’s contractor or some other contractor) on the basis of its own business decisions. If the
operator employs its own contractors, an HT’s employee will supervise the works. For all
works carried out by HT’s employees in case of realisation of collocation premises HT must
publish the price list of the relevant works in its reference offer to make the prices transparent
to all operators paying for the preparation of and putting at the disposal of collocation
premises. The prices charged by HT for the provision of the service of access to the
unbundled local loop and the related facilities must be in compliance with the principles of
transparency, non-discrimination, objectivity and cost-orientation and they must be based on
actual costs of provided services, including a reasonable rate of return on investments. HT,
who is responsible for providing the service of access to the local loop, shall be responsible
for proving that the prices are justified.
Pursuant to Article 61, paragraph 3, item 8 of ECA, the Agency also imposes on HT the
obligation to grant access to operational IT support system in accordance with international
standards, via a WEB interface with the adequate security protection and regular 2-hour
updating of the status, which allows access to the following information:
• information system for the monitoring of requests of beneficiaries for the service of
unbundled access to the local loop (successful unbundling of the local loop, denial of
unbundling of the local loop),
• requests of operators to repair a malfunction, status and the status of escalation of the
repair of other operator’s malfunctions;
• information concerning the provision of the service of collocation;
• information on invoicing for services provided to other operators;
• information on the existence of secondary equipment for multiple use of the twisted
copper pair in HT’s access network (information whether an individual pair is realised
with active equipment or not).
In accordance with Article 61, paragraph 4 of the ECA, in relation to the imposed obligations,
the Agency imposes on HT additional requirements concerning the fulfilment of the
principles of fairness, reasonableness and timeliness. Therefore, the Agency imposes on HT
the obligation to ensure the basic level of the SLA service, among other things, the
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compliance with the following deadlines when providing the service of unbundled access to
the local loop and related facilities, in the following manner::
• HT must consider every received request for concluding the contract which is
prepared in accordance with terms and conditions of the reference offer and conclude
a contract with the beneficiary within 15 days from the receipt of the request;
• HT is obliged to negotiate with the beneficiary on the resolution of the request for the
conclusion of the contract on access to the unbundled local loop. If agreement on
access to the unbundled local loop between HT and the beneficiary is not reached
within 30 days from the receipt of the request for the conclusion of the contract on
access to the unbundled local loop, operators involved in negotiations on access to the
unbundled local loop may address the Agency;
• If HT concludes that the received request for unbundling of the local loop does not
contain all the necessary data, it shall, within 5 working days, request from the
beneficiary to amend the request;
• HT must ensure to the beneficiary access to the unbundled local loop within the
maximum of 10 working days from the date of receipt of a complete request for the
unbundling of the relevant local loop. The existing local loop which is currently not
used shall be realised within 20 working days from the date of receipt of the complete
request for the unbundling of an individual local loop. A newly realised local loop
must be marked with a designation referring to a certain beneficiary and bearing the
ID of the unbundled local loop;
• In case of a request for full unbundled access to the local loop and number portability
request of a certain subscriber, which require access to the unbundled local loop, HT
must harmonise the dates of realisation of both services taking into account the time
limits for both services;
• Upon request of a beneficiary who already has implemented the collocation for the
service of unbundled access to the local loop at the location of the local
interconnection access point, HT shall immediately provide collocation for
interconnection services with the existing leased space in the collocation which is used
for the service of unbundled access to the local loop, the already installed
telecommunications cabinet and the existing power supply and air-conditioning may
being used for the purpose of interconnection. In this case of provision of collocation
for the interconnection service at a location where there already exists collocation for
the service of unbundled access to the local loop, the beneficiary shall be fully
responsible for the interruption in the service of interconnection resulting from the
interruption of power supply of the beneficiary’s equipment;
• Upon request of the beneficiary, HT must offer the air-conditioning of the collocation
premises with an additional compensation. In its request the operator must indicate the
power dissipation of its equipment and the expected dissipation in case of upgrading
of the equipment. HT must, within 15 days from the submission of the request of the
beneficiary, deliver a request for the installation of air-conditioning into collocation
premises. HT must, within 30 days from the receipt of the accepted offer of the
beneficiary, install air-conditioning into collocation premises. The beneficiary must be
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allowed to choose, on the basis of its own business decisions, the supplier of air-
conditioning equipment and the contractor who will install this equipment under
supervision of HT’s employee. In this way the Agency is trying to prevent the
charging of unnecessary costs to other operators and thus ensure more competition on
the retail market;
• HT will reply in writing to the former request for data on the local loop within 6
working days after the receipt of the request. In the reply, HT will inform the
beneficiary on the availability, length, technical characteristics (diameter of
conductors, type of insulation, work capacity, structure per segments if the local loop
is not homogenous, and the usability factor for the used cable) for each requested local
loop separately;
• In order to ensure the continuity of its own business operations on one hand and to
support the processes of the beneficiary on the other, HT shall provide to the
beneficiary, upon the beneficiary’s request, within 15 days from the receipt of the
request in question, access to IT operational support systems in accordance with
international standards;
• The maximum time allowed for the repair of malfunctions is two days (48 hours) from
the moment when the repairing has started. For the purpose of more efficient and more
effective repair of malfunctions, HT must establish an adequate procedure for repairs
and a system of measuring and testing the unbundled local loop that will guarantee
complete transparency and non-discriminatory behaviour in procedures and processes
for repairing beneficiary’s problems. The procedure and a detailed description of the
repair process that must be applied by HT from 1 October 2009 have been prescribed
in a special instruction – Instruction on the removal of interferences in case of service
of unbundled access to the local loop – that will be subsequently adopted by the
Agency and make a constituent part of the reference offer;
• HT must immediately inform by electronic means the beneficiary of the repair of the
reported malfunction/interference, and deliver a detailed description of the
malfunction and the repair process. HT must prove that the malfunction is not HT’s
responsibility but the beneficiary’s responsibility. The Agency finds the imposition of
this obligation necessary because the beneficiary will, on the basis of the repaired
malfunction/interference proceed with activities towards the end user. If HT fails to
notify the beneficiary of the repair of the malfunction/interference, this means that the
beneficiary must delay the repair of malfunction/interference towards the end user due
to denial of information, which, finally, leads to the fall of its competitiveness on the
retail market;
• Before the conclusion of the contract on the use of the service of unbundled access to
the local loop with HT, the beneficiary may ask from HT in writing to provide
information on locations of the main distribution frame intended for the service of
unbundled access to the local loop provided that the beneficiary submits a signed
statement of confidentiality. HT shall, within 5 working days from the receipt of the
original request, deliver the following information in writing:
o Geographical position of the requested main distribution frame,
o Number of channels per location of the main distribution frame,
o Dialling code of the public switched telephone network,
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o Geographical coverage per individual HT’s main distribution frame in the form
of maps or an index of streets covered by an individual HT’s main distribution
frame.
• HT must consider every received request for collocation or extension of collocation,
which contains all data and has been prepared in accordance with the conditions from
the reference offer, and it must deliver a written offer for a collocation or for the
extension of collocation to the beneficiary within 30 days from the receipt of the
request. HT will deliver to the beneficiary an itemised collocation offer and/or offer
for the extension of a collocation in writing if the collocation and/or extension of
collocation is possible in accordance with the beneficiary’s request or a written
notification why the requested collocation and/or extension of collocation is not
possible at the desired location, and, within 15 days from the date of denial of the
request, it shall deliver to the beneficiary a detailed explanation of reasons for denial,
and, if it is technically feasible, propose a different kind of collocation. The copy of
the letter of denial shall be submitted by HT to the competent regulatory authority;
• If the request for collocation is denied because collocation or sharing of equipment is
not available at the moment of submission of the beneficiary’s request for collocation
because HT is no longer able to provide access to this equipment and/or premises due
to obligations arising from previously concluded contracts with other beneficiaries,
HT must, within 10 days from the receipt of the request, submit to the beneficiary the
notification of denial. HT will, provided that it is technically feasible, submit to the
beneficiary, in addition to a detailed explanation why the request was denied, a
proposal for another type of collocation or sharing of equipment within 15 days from
the date of denial of the request. If a beneficiary accepts another type of collocation or
sharing of equipment within 30 days at the latest, HT shall within 5 days from the
receipt of the notification of acceptance of the proposal for another type of collocation
or sharing of equipment, deliver the relevant offer;
• The beneficiary must, within 30 days from the receipt of the offer for collocation,
inform HT in writing of the acceptance or refusal of the offer;
• The time limit for the establishment of collocation shall depend on the type of
collocation (physical, distant or virtual), but this time limit may not exceed 60 days
from the date of receipt of the notification of the beneficiary on the acceptance of the
offer for collocation or, in case of the establishment of the extension of collocation,
the time limit shall not exceed 30 days from the receipt of the beneficiary’s
notification of acceptance of the offer for the extension of collocation, provided that
the beneficiary has already paid or submitted a security instrument. If the installation
of collocation equipment and/or building of collocation premises require a building
permit, the time limit shall start from the date when the building permit becomes final.
Within the maximum of 15 days from the receipt of the notification of acceptance of
the offer, HT and the beneficiary shall sign a contract on the provision of collocation
services that will cover all collocations agreed between HT and the beneficiary,
together with the marked deadline for the deliver of the selected security instrument.
Within the maximum of 5 days from the date of receipt of the signed contract on the
provision of collocation services, HT shall issue to the beneficiary a pro forma invoice
for the agreed collocations. The deadline for the payment of the pro forma invoice for
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agreed collocations shall be 8 working days from the date of issue of the pro forma
invoice by HT;
• HT must, upon the beneficiary’s request, ensure identical forms of power supply at
collocation premises to those provided for self supply and for its affiliated companies;
• HT must, upon the beneficiary’s request, ensure virtual collocation where the building
of physical space is not necessary, and devices are accommodated in the existing HT’s
premises;
• If there is no fee space for physical collocation, HT must, upon the beneficiary’s
request, enable the linking with a distant collocation which is the responsibility of the
beneficiary;
• HT must, upon the operator’s request, install, within 4 months, control electricity
meters for measuring the actual power consumption by beneficiaries at existing
collocation premises (including a special meter for electic power consumed by air-
conditioners installed in collocation premises) in which case the prices must be based
on actual costs. The beneficiary must also be allowed to choose a supplier of meters
on the basis of own business decisions, and the contractor who will install the meters
in the main distribution cabinet in collocation premises. HT must be informed thereof
on time. In this way, the Agency is trying to prevent the charging of unnecessary costs
to other operators, that is, the behaviour described in Chapter 6.4.2.3 of this document
and thus ensure more competition on the retail market;
• HT must charge the consumed power at a price that it pays to its own supplier;
• HT must, within 90 days from the date of handing over of collocation premises, adjust
the advance payment for the preparation of collocation premises and putting at
disposal by reimbursing to beneficiaries the overpaid amount. When assessing the
total costs in the offer for collocation services, HT must use unit prices of materials
from the accounts receivable of its official financial system on the date of preparation
of the offer. Since this is the assessment of costs of preparation of collocation premises
and putting them at disposal, the Agency thinks that this obligation must be imposed
in order to harmonise the paid expenses with actual costs of preparation of collocation
premises and putting at disposal, in order to protect the interests of HT and the
beneficiary. Since beneficiaries base their business plans, among other things, on the
relevant wholesale costs, this will help avoid that HT, by generating one-off
(unjustified) costs for the beneficiary, influences the beneficiary’s decision concerning
the collocation service offer and hinders market liberalisation. Collocation services are
a necessary precondition for the use of the service of unbundled access to the local
loop which allows the beneficiary to offer its own services to its users.
In the existing RIO, HT has prescribed obligations towards operators in relation to the service
of unbundled access to the local loop. These obligations are, for example, the deliver of
services of collocation/extension of collocation, deliver of access to the unbundled local loop,
repair of malfunctions, and, consequently, certain fees in case of violation of these obligations
have also been defined (failure to comply with deadlines). Although the deadlines for the
delivery already make a constituent part of HT’s reference offer, the Agency thinks that they
must be included in the obligations imposed on HT to ensure that the obligations are fulfilled.
By delaying the fulfilment of obligations laid down in Article 56, paragraph 2 of the ECA, HT
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would be in position to restrict the entry of new operators on the market and influence the
business operations of the existing operators because they largely depend on HT’s behaviour
for their business. In this case, end users of operators using HT’s services would suffer and
thus lose confidence in the quality of service of competitors at their disadvantage and at the
advantage of HT. The disturbing of operators by not fulfilling obligations within reasonable
time limits might also be reflected in delays with the processing of questions or ensuring the
collocation services, and by stalling the repair process. Therefore, the Agency thinks that the
imposition on HT of the obligation to pay a penalty in case of delay would encourage this
operator to fulfil its obligations within the defined time limits, and prevent possible HT’s
behaviour described in Chapter 6.4.2.2 of this document.
As a result, the Agency imposes on HT the time limits for the delivery of service and
penalties in case of delay with the delivery of services in relation to obligations imposed on
HT in order to force HT to respect the time limits and to enable operators to timely provide
services to the end users. The Agency imposes only penalties in case of delay with the deliver
of services referring to basic obligations related to the provision of services, while fines for
non-compliance with other time limits have been imposed in accordance with the ECA
provisions. Therefore, the Agency imposes on HT the following penalties in case of delay
with the delivery of services:
• HT must, for every local loop where there is no need to work at end user’s premises,
pay a penalty for every day of delay with the delivery of an individual local loop in the
following manner: for the first 10 days the contractual fine amounting to 50% of the
monthly fee for the use of the unbundled local loop per each individual day of delay,
and 150% of the monthly fee for the use of the unbundled local loop for each
individual day from the 11th
day of delay;
• If HT does not deliver to the beneficiary the collocation offer within the prescribed
time limit, it must pay to the operator HRK 500.00 per day for the first 10 days of
delay, and HRK 1,000 per day from the 11th
day of delay on;
• HT must pay to the operator for every day of delay wtih the realisation of collocation a
delay penalty, more precisely, for the first 10 days of delay it must pay HRK 500 to
the operator for every day of delay, and from the 11th
day on, HRK 2500 for every day
of delay;
• In case of delay with the repair of malfunctions within 48 hours from the expiry of the
maximum time envisaged for the repair of the malfunction, HT must pay to the
operator a penalty amounting to one monthly fee for the use of the unbundled local
loop and for the delay exceeding 48 hours from the expiry of the maximum time
envisaged for the repair, an additional 20% of the monthly fee for the use of the local
loop per a day of delay (starting from the date of expiry of the maximum time allowed
for the repair of a malfunction)
Concerning penalties in case of delay with the delivery of services it must be emphasised that
they already are a part of the Reference Offer for the service of access to the unbundled local
loop. The penalties for every day of delay with the delivery of the individual local loop that
amounting to 50% of the monthly fee for the use of the unbundled local loop per a day of
delay for the first 10 days the contractual fine, and 150% of the monthly fee for the use of the
unbundled local loop for each individual day from the 11th
day of delay have been increased
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compared to the currently valid ones in order to force HT to deal with access problems in the
adequate and most efficient way. It must be mentioned that in case of delay in the delivery of
an individual local loop, the beneficiary has, in addition to the real damage, the damage in the
form of lost profits since continuous delays with the delivery of individual local loop damage
the operator’s credibility.
The mentioned time limits for the provision of the service of unbundled access to the local
loop and related facilities and the penalties in case of delay with the delivery of the service
may be amended by the Agency in the procedure for the amendment of the reference offer for
unbundled access to the local loop and related facilities, if it finds it necessary in order to
encourage competition, that is, to prevent the distortion or hindering of competition in the
electronic communication sector.
In order to ensure the application of the basic level of SLA, the Agency imposes on HT the
obligation to publish performance indicators on a quarterly basis or upon the Agency’s
request as elaborated in detail in the section on the obligation of transparency. Furthermore,
the Agency also imposed the obligation on HT to, in accordance with the obligation of non-
discrimination62
, notify the Agency of all advanced SLA provided by HT to other operators
on the basis of commercial agreements for its retail arm or to its affiliated companies. In this
manner the Agency wishes to establish whether HT has ensured equivalent conditions in
equivalent circumstances to other undertakings providing equivalent services, or, in other
words, whether HT provides, in case of advanced SLA, such a level of SLA to one operator
for a certain price and to another operator for that same price.
Furthermore, HT must remove the restrictions prescribed in the existing reference offer that
services or parts of services which are a subject of the Reference Offer for unbundled access
to the local loop may not be ceded to third parties without HT’s prior consent. The Agency
finds this condition unnecessary because the relationship between HT and the operator using
the service of unbundled local loop will remain unchanged. In other words, the operator who
unbundled the loop from HT still has to comply with all the provisions of the relevant
reference offer since the reference offer regulates only the wholesale relationship between HT
and the alternative operator, and, in case of non-compliance, it shall be considered
responsible, and not the third party providing retail services over the unbundled local loop. It
must be mentioned that the operator using unbundled access to the local loop (lesee), who
intends to give the pair to a third party (Sub-lesee) for use must include in the mutual
agreement all possible operational activities that might occur during provision of such a
service. In other words, pursuant to the provisions of the Civil Obligations Act, Article 537,
subleasing is possible if does not cause damage to HT. Therefore, the beneficiary (lesee) of
unbundled access to the local loop is still responsible for adequate use of the service of
unbundled access to the local loop and responds to HT (lessor), e.g. all correspondence with
HT must still go through the beneficiary of unbundled access to the local loop – the reporting
of malfunctions, payment of the monthly fee etc. Considering the previously mentioned
responsibility of the beneficiary, the beneficiary must always have information about the
transfer speed provided by the sublesee over the leased pair (unbundled local loop by the
beneficiary), and fully respect the provisions defined in the Static Plan for Frequency
Spectrum Management and the Accompanying Plan for Pair Management63
.
62
The obligation of non-discrimination has been elaborated in Chapter 7.1.2. of this document. 63 The obligation to publish the „Static Plan for Frequency Spectrum Management „ with the accompanying pair
management plan has been defined as part of the obligation of transparency defined Chapter 7.1.3. of this
document.
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However, the Agency thinks that the regulatory obligation of access to and user of specific
network facilities alone, that is, without imposing other regulatory obligations, may not
resolve competition problems identified in Chapters 6.4.2 and 6.4.3 of this document and it
therefore feels that this obligation must be supplemented by other obligations in order to
influence all existing and potential problems.
7.1.2. Obligation of non-discrimination64
The Agency may, in accordance with the provisions of Article 56 of the ECA, impose on
operators the obligation of non-discrimination in relation to interconnection and/or access.
The subject of this document is the market of wholesale (physical) network infrastructure
access (including shared or fully unbundled access) at a fixed location, on the basis of which
the Agency shall impose on HT the mentioned obligation related to access.
An operator, who has been imposed the obligation of non-discrimination pursuant to Article
59, paragraph 2 of the ECA, must, in particular, ensure equivalent conditions in equivalent
circumstances to other undertakings providing equivalent services, and provide services and
information to others under the same conditions and of the same quality as it provides for its
own services, or for the needs of its affiliated companies.
Consequently, the Agency imposes on HT, as the operator with significant market power on
the relevant market which is the subject of this document, a regulatory obligation of non-
discrimination and, in accordance with this regulation obligation, HT must:
• Ensure equivalent conditions65 in equivalent circumstances to other undertakings
providing equivalent services;
• Provide services and information to others under the same conditions and of the same
quality as it provides for its own services, or for the needs of its affiliated companies;
• Deliver to the Agency contracts concluded on the basis of the reference offer for
unbundled access to the local loop within 15 days from their signature.
The Agency thinks that the imposition of the obligation of access66
is not by itself a sufficient
measure since HT may, despite this obligation, on the basis of certain behaviour described in
Chapters 6.4.2 and 6.4.3 of this document, ensure better conditions for doing business to itself
and its affiliated companies, thereby hindering competition at the retail level. In accordance
with this, the regulatory obligation of non-discrimination supplements the obligation of access
to prevent HT from granting access under discriminatory conditions and to create effective
competition.
By imposing a regulatory obligation of non-discrimination on HT as the SMP operator on the
market of wholesale (physical) network infrastructure access (including shared and fully
unbundled access) at a fixed location, the Agency aims at resolving all competition problems
64
Article 10 of the Access Directive. 65 Conditions, time limits, prices, information etc. 66
The Agency includes under the obligation of access the obligation of access to and use of specific network
facilities.
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laid down in Chapters 6.4.2 and 6.4.3 of this document and all problems which have not been
explicitly defined but may result in the same consequences on the market. This regulatory
obligation will solve competition problems related to price discrimination and non-price
discrimination, which will additionally be solved by imposing a regulatory obligation of
transparency.
Furthermore, pursuant to Article 58 of the ECA, the Agency may not impose the obligation of
publication of the reference offer to SMP operators if it had not imposed the obligation of
non-discrimination along with the obligation of transparency to these operators. Based on the
above reasons, and taking into account elaborations from Chapter 7.1.3 of this document
explaining why it is indispensable for the market that HT is imposed the obligation to publish
the reference offer for unbundled access to the local loop, the Agency imposes on HT the
obligation of non-discrimination.
.
The obligation of non-discrimination will ensure that operators are entitled to equivalent
conditions of service of unbundled access to the local loop and sub-loop, equivalent price and
services and information of the same quality as that provided by HT to its own retail arm and
as that provided to its affiliated companies.
This will ensure that services and information are provided to other operators within the
defined time limits and in accordance with quality standards which are equivalent to those
conditions that HT provides to its own retail arm and as those provided to its affiliated
companies. HT must timely inform all operators with which it has concluded contracts on
unbundled access to the local loop about all planned changes on the network, that is, about all
plans to modernise the network i.e. the information must be delivered in the same manner and
of the same quality as provided by HT to its retail arm and affiliated companies.
Furthermore, as part of the obligation of non-discrimination, the Agency imposes on HT the
obligation to timely deliver to the beneficiary data on planned upgrades to the network or on
the planned opening of new points of access in relation to an individual local loop. Without
regulation, HT might deny detailed and timely information on planned network changes to
current and potential competitors, which would have a negative impact on business plans and
investments of these operators since they would not be able to react in time and adjust to the
changes, including a timely reaction at the retail level. On the other hand, HT would ensure
the first mover advantage and thus improve its own position on the retail market in relation to
current and potential competitors.
HT must also provide all the necessary information on planned network changes so that
operators using the service of unbundled access to the local loop could react in time and
adjust to the changes, including a timely reaction at the retail level. Therefore, the Agency
imposes on HT the obligation to notify operators of planned network changes at least one year
before the start of implementation of the mentioned changes. Modernisation plans for the
access network of the infrastructure operator, such as the opening of new access nodes,
redirecting of a part of the network to the new access node and the similar must be carried out
in the manner that the existing services provided by operators to their end users are not
threatened, that is, the principles of spectrum compatibility in the access network must be
completely observed.
The Agency also obliges HT to provide information on the network, on available local loops
and network upgrades in order to, by informing the operator in the same way as HT’s retail
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arm and affiliated companies, prevent a situation in which local loops are upgraded for
broadband access only when needed by HT’s retail arm or its affiliated companies. Since HT
already disposes of an IT base of such data, the Agency thinks that this obligation is
proportionate to the goal because it prevents the leveraging of significant market power. In
this manner, other operators will be treated equally and receive equivalent information as
HT’s retail arm or its affiliated companies, to the advantage of end users.
Furthermore, HT must deliver to the Agency contracts concluded on the basis of the reference
offer for unbundled access to the local loop and the related facilities67
within 15 days from the
conclusion of the contracts. This is necessary for the Agency to be able to verify whether HT
respected the obligation of non-discrimination. In case of non-compliance with the above-
mentioned obligation, and pursuant to the obligation to deliver the contracts, the Agency
would be able to react in a timely manner.
The Agency deems that the regulatory obligation of non-discrimination is necessary to
prevent all possible discriminatory behaviour of SMP operators on the market as described in
Chapters 6.4.2 and 6.4.3 of this document. This kind of behaviour, if it occurs, would cause
the most damage to end users. The prevention of all discriminatory behaviour creates
conditions for easier market entry of all new operators, which is the goal of improvement of
competition in the retail market. This regulatory obligation ensures to all operators on the
market information, time limits, terms and conditions, quality and price of services equivalent
to those that the operator having significant market power provides to its affiliated companies
and to its own retail arm supplying the service in question..
The Agency feels that the fulfilment of the obligation of non-discrimination necessitates the
imposition of the obligation of transparency and of the obligation of accounting separation in
order to monitor the effectiveness of the obligation of non-discrimination itself.
.
7.1.3. Obligation of transparency68
The Agency may, in accordance with the provisions of Article 56 of the ECA, impose on
operators the obligation for transparency in relation to interconnection and/or access requiring
that certain information are made publicly accessible, such as:
• accounting information;
• technical specifications;
• network characteristics;
• terms and conditions for supply and use;
• prices.
Also, in accordance with the provisions of Article 58 of the ECA, the Agency may request
from the operator, who has been imposed the obligation of non-discrimination, to publish a
reference offer that will help other operators avoid additional costs which are not necessary
for the provision of the service in question. The reference offer must be broken down into
67The obligation to publish the reference offer has been laid down as part of the obligation of transparency
elaborated in Chapter 7.1.3. 68
Article 9 of the Access Directive
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components according to market needs, and it must include the associated time limits, terms
and conditions and prices of services.
Taking into account competition problems elaborated in detail in Chapters 6.4.2 and 6.4.3 of
this document, the Agency imposes on HT, as the operator with significant market power on
the market of wholesale (physical) network infrastructure access (including shared and fully
unbundled access) at a fixed location, the obligation of transparency in relation to access.
As a result of all of the above, the Agency imposes on HT, as the SMP operator on the market
which is the subject of this document, the obligation of transparency in the following manner:
• HT must publish the reference offer for unbundled access to the local loop and related
facilities for all services comprised in the market definition given in Chapter 4.3 of
this document to ensure that other operators are not required to pay additional costs
which are not necessary for the provision of the service.
• The reference offer for unbundled access to the local loop and related facilities must
be broken down into components according to market needs, and it must include the
associated time limits, terms and conditions and prices of services;
• The reference offer must also contain a part that will define the conditions for
collocation together with time limits, conditions and prices for the provision of the
service;
• HT must deliver to the Agency detailed reports with all relevant performance
indicators every three months or on as needed basis upon the Agency’s request;
• HT must allow the Agency access to the system/database used for computing and
storing of key performance indicators - KPI
The purpose of this obligation is to ensure that all operators in the relevant market have the
possibility of insight into conditions of use of the service of unbundled access to the local
loop and sub-loop. The obligation of transparency is fully compatible with the previously
imposed obligation of non-discrimination, and it is necessary because service of unbundled
access to the local loop and sub-loop is technically very demanding. For that reason, the
obligation of non-discrimination may be implemented only if all information and conditions
necessary for the service of unbundled access to the local loop and sub-loop are transparently
presented.
Furthermore, because of the technical complexity of the service of unbundled access to the
local loop and sub-loop, access to necessary information would not be sufficient in itself,
which is why HT must publish the reference offer on the basis of which other operators will
not be obliged to pay additional costs which are not necessary for the provision of the service.
The reference offer must describe services offered by HT in relation to the service of
unbundled access to the local loop and sub-loop and collocation service and it must be broken
down into components according to market needs and associated conditions, including prices,
reasonable time limits and compensations in case of a delay, everything in accordance with
obligations specified in the decision referred to in Article 56, paragraph 2 of the ECA. The
reference offer must also contain a part where conditions of collocation services will also be
defined together with time limits, conditions and prices for the provision of the service
Furthermore, the Agency imposes on HT the obligation to, in relation to the obligation
imposed on HT as part of the obligation of access and concerning the provision of the service
of leasing of dark fibre, lay down conditions, time limits and prices of the service of leasing of
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dark fibre in the reference offer for unbundled access to the local loop and related facilities
within 90 days from the receipt of a reasonable request. The Agency may, in a special
procedure, amend the prices and conditions for the provision of the service if it does not find
them reasonable and justified.
Furthermore, the Agency imposes on HT, in addition to the obligation imposed on HT under
the obligation of access to, and use of, specific network facilities, and in relation to the
provision of access on the basis of wavelength (WWDM access), the obligation to, specify
conditions, time limits and prices of the service of WWDM access in the reference offer for
unbundled access to the local loop and related facilities. The Agency may, in a special
procedure, amend the prices and conditions or the provision of the above-mentioned services
if it does not regard them as reasonable or justified.
The Agency also imposes on HT the obligation to publish, in addition to the reference offer
for unbundled access to the local loop and related facilities, the Static Plan for Frequency
Spectrum Management with the accompanying pair management plan in HT’s access
network, in accordance with the conditions to be laid down by an Agency’s decision. The
major technical problems which are increasing in importance when broadband technologies
are applied over copper access networks necessitate the frequency spectrum management plan
in copper cables in order to control interferences between the system and the realisation of
anticipated performance of the existing infrastructure for HT and operators. The Static Plan
for Frequency Spectrum Management must be based on the associated Study of the Static
Plan for Frequency Spectrum Management which is a result of research conducted by the
Faculty of Electrical Engineering and Computing in Zagreb. The Static Plan for Frequency
Spectrum Management is supposed to improve the usability of the existing copper cable
infrastructure to increase transfer speed necessary for broadband services. In case of technical
interferences caused by mutual influences of HT’s equipment and technologies and
beneficiary’s equipment and technologies, HT and the beneficiary shall invest their biggest
efforts to remove the causes of technical interferences. HT will regularly analyse the
application of the Static Plan and, where necessary, propose changes to the Agency. Both HT
and beneficiaries using HT’s access network to provide their services must ensure that
DSLAM equipment with its related user facilities operates in the adaptive (minimal) power
mode in order to rationalise the use of access network infrastructure in accordance with
conditions to be laid down in an Agency’s decision.
The reference offer must contain the conditions for the use of the service of unbundled access
to the local loop and types of transfer technologies that can be installed in the sub-loop and
under which conditions, and the related time-limits, penalties in case of delay and prices.
The Agency establishes that, pursuant to the obligation of non-discrimination, HT must be
imposed the obligation to prepare the reference offer in such a manner that will show that
operators have access to information over an information system. The Agency established that
this obligation does not represent an excessive burden on HT because HT already had such an
electronic database when market analysis was in progress. A computerised way of doing
business and communicating is nowadays a practice that increases the efficiency of
companies. The Agency thinks that this manner of work has positive impact on the efficiency
of HT’s business operations as well.
Also, as it was already mentioned in Chapter 7.1.1 of this document, HT must, for all works
on the realisation of collocation premises carried out by HT’s employees, publish in the
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reference offer for unbundled access to the local loop and related facilities a price list of the
works in question to make the prices transparent to all operators when they pay the costs of
preparation of collocation premises and putting them at disposal.
Furthermore, HT must define in the reference offer the conditions for switching from the
bitstream access service to the service of unbundled access to the local loop and sub-loop in a
manner that does not endanger the continuity of beneficiary’s business operations.
The basic content of the reference offer, the degree of details and the manner of publication of
the reference offer are described in the Ordinance on reference offers69
, which was adopted by
the Agency’s Council and which entered into force on 1 April 2009..
The Agency shall set time limits for HT to publish the reference offer according to types of
services comprised by the relevant market70
.
a) Unbundled access to copper-based local loop
HT is obliged o publish the reference offer for unbundled access to the local loop and related
facilities on 1 October 2009. The offer must include terms and conditions, time limits and
prices of the service of unbundled access to copper-based local loop. Since HT already has a
reference offer for the service of unbundled access to the local loop based on obligations laid
down in the ECA, the Agency thinks that the deadline of 1 October 2009 is sufficient to
incorporate all amendments and to harmonise the text and content of the offer with regulatory
obligations which have been imposed on HT in this document, and with the Ordinance on
reference offers. HT’s reference offer will remain unaltered in all those parts in which
regulatory obligations have not changed. Should the Agency establish that the published
reference offer is contrary to the imposed obligations or contrary to provisions of the ECA, it
may request that the offer be amended.
b) Unbundled access to copper-based local sub-loop
HT must, within 90 days from the receipt of a reasonable request for the service of unbundled
access to copper-based local sub-loop specify conditions, time limits and prices of the service
of unbundled access to the local sub-loop in the reference offer for unbundled access to the
local loop and related facilities. Within the same time limit, HT must define the terms and
conditions for the collocation, together with time limits, conditions and prices for the
provision of the service in the manner which does not endanger the continuity of business
operations of beneficiaries. . Should the Agency establish that the conditions, time limits and
prices of unbundled access to the local loop are contrary to the imposed obligations or
contrary to the imposed obligations and provisions of the ECA, it may request that the offer
be amended.
c) Unbundled access to fibre-based local loop based on point-to-point link
HT must, within 90 days from the receipt of a reasonable request for the service of unbundled
access to fibre-based local loop based on point-to-point link specify conditions, time limits
69
OG 37/09 70
According to the definition referred to in Chapter 4.3 of this document.
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and prices of the service of unbundled access to fibre-based local loop based on point-to-point
link in the reference offer for unbundled access to the local loop and related facilities.
Furthermore, in order to harmonise reference offers that must be published by all operators
having the status of an operator having significant market power on the relevant markets and
in order to ensure transparent conditions for business operations of operators having
significant market power and operators using the reference offer, that is, in order to prevent
HT from abusing its position of the SMP operator, and with the final goal to prevent the
distortion and hindering of competition in the electronic communications sector, HT must
incorporate the following in its reference offer that will be published on 1 October 2009:
• One of the security instruments that will be established by HT in the reference offer
for unbundled access to the local loop and related facilities must be a bill;
• HT is obliged to send during the current month invoices for the services which are the
subject of this reference offer and which have been provided in the pervious month;
• The maturity of the invoice is 30 days from the sending of the invoice, and HT shall
send a written dunning letter after the expiry of the maturity;
• HT shall apply the collection procedure on the basis of the submitted security
instruments only if the operator does not cover its mature and indisputable debts
within 30 days from the receipt of a written dunning letter;
• In case HT may not collect from the security instruments, HT may temporarily
discontinue the provision of the service only if the other operator does not pay any
overdue and indisputable invoice for services laid down in the reference offer within
30 days from the receipt of the written dunning letter. HT shall not be entitled to
temporarily discontinue the provision of the service if the operator delivers or renews
the adequate security instrument within 30 days from the receipt of a written dunning
letter.
The Agency shall once a year conduct the amendment procedure of the reference offer for the
purpose of implementation of regulatory obligations imposed pursuant to the provisions of the
ECA. For the purpose of satisfaction of regulatory principles and objectives referred to in
Article 5 of the ECA, the procedure for the amendment of the reference offer for unbundled
access to the local loop and related facilities may also in exceptional circumstances be
conducted several times a year. If the reference offer is amended on the basis of the above-
mentioned provisions of the ECA, the Agency shall impose on HT the obligation to publish
the new text of the reference offer within the time limit specified in the decision concluding
the process initiated in accordance with Article 58, paragraph 3 of the ECA.
If the SMP operator or some other operator wishes to initiate the procedure for the
amendment of the reference offer for unbundled access to the local loop and related facilities,
it must notify the Agency thereof and the Agency shall, provided that it considers the
operator’s request justified, initiate the procedure for the amendment of the reference offer
pursuant to Article 58, paragraph 3 of the ECA. If the reference offer is amended on the basis
of the above-mentioned provisions of the ECA, the Agency shall impose on HT the obligation
to publish the new text of the reference offer within the time limit specified in the decision
concluding the process initiated in accordance with Article 58, paragraph 3 of the ECA.
The Agency thinks that the publication of the reference offer removes barriers for market
entry defined in Chapters 6.4.2 and 6.4.3 of this document and encourages the entry of new
operators, this stimulating competition at the retail level. Therefore, the Agency finds this
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obligation adequate and proportionate because, without regulation, HZ might, by means of
non-transparent terms and conditions, offer to other operators terms and conditions and prices
which are different from the ones provided for its own retail arm and its affiliated companies.
Therefore, the publication of the reference offer is a necessary obligation because it ensures
transparency of HT’s activities and, at the same time, supplements the obligation of non-
discrimination.
Furthermore, as part of the obligation of transparency, the Agency shall impose on HT the
obligation to monitor the relevant performance indicators starting from 1 January 2010, and to
deliver to the agency detailed reports with all performance indicators every three months71
or,
as appropriate, upon the Agency’s request. The Agency must be allowed access to the
system/database used for computing and storing of key performance indicators - KPI. Other
operators must also be allowed access to KPI data related to their activities, via HT’s WEB
interface. Furthermore, the Agency shall impose on HT the obligation to publish some or all
KPI values upon Agency’s request on its website in the adequate form. While doing this, it
must ensure that confidential data are not revealed to the public. Furthermore, HT must
deliver to the Agency the entire report every three months together with confidential data so
that the Agency may follow and, if necessary, prevent any kind of discriminatory behaviour
towards other operators. The KPI report must, in particular, contain the following:
• The number of received/denied/realised requests for unbundled access to an individual
local loop or sub-loop per operator
• The putting of the local loop at disposal – average (in days) per operator
• The number of delayed realisations of requests for unbundled access to a local loop or
sub-loop per operator
• The average delay in the realisations of requests for unbundled access to a local loop
or sub-loop per operator
• The number of received/denied/realised requests for the offer of collocation/extension
of collocation per operator and per type of collocation (physical internal, physical
external, distant or virtual)
• The establishment of collocations (physical internal, physical external, distant or
virtual) – average in days per operator
• The number of realised collocations (physical internal, physical external, distant or
virtual) outside a specific time limit (average) per
• The average time for the establishment of the service (collocation or unbundled
access to the local loop or sub-loop) per operator
• The number of notified malfunctions (interferences) per operator
• The average time for repair of the malfunction in the service of unbundled access to
the local loop or sub-loop per operator per service
• The average time of repair of defects of intermediary cables
• The average time of repair of defects of transfer cables
• The average time of repair of malfunctions in power supply
• The percentage of repaired malfunctions outside the set time limit per operator
The Agency may subsequently adopt a decision asking from HT to monitor and notify some
other KPI values depending on the Agency’s needs and market demands.
71
The first quarterly report must be submitted by HT in April of 2010.
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Furthermore, within the obligation of transparency, and in order to supplement the obligation
of non-discrimination and remove the potential problems defined in Chapter 6.4.2.1 of this
document, HT must deliver/provide access to the following to all operators with which it has
concluded the contract for unbundled access to the local loop, upon their request:
• Information on network typology with locations of the main distribution frame, the
number of cable pairs connected to the main distribution frame and the number of
twisted pairs in the access network;
• Information on the availability, that is, on the number of active and the number of
available local loops and sub-loops on certain locations, that is, on all locations where
there is a possibility for collocation;
• Information on the existence of secondary equipment for multiple use of the local loop
and sub-loop in HT’s access network (information whether an individual local loop or
sub-loop has been realised with active equipment or not);
• Information on geographical coverage per individual HT’s main distribution frame or
other adequate equipment in the fixed telephone network in the form of a map or an
index of streets covered by an individual HT’s main distribution frame or other
adequate equipment in the fixed telephone network;
• Information on planned changes in the network and drafts for modernisation of the
network.
These obligations supplement the non-discrimination obligation and remove all potential
barriers defined in Chapters 6.4.2 and 6.4.3 of this document and similar barriers which have
not been explicitly defined.
.
7.1.4. Price control and cost accounting obligation72
The Agency may, pursuant to the obligations of Article 56 of the ECA, impose obligations
relating to cost recovery and price controls, including obligations for cost orientation of prices
and obligations concerning cost accounting systems, for the provision of specific types of
interconnection and/or access, in situations where a market analysis indicates that a lack of
effective competition means that the operator concerned might sustain prices at an excessively
high level, or apply a price squeeze, to the detriment of end-users.
The Agency shall ensure that any cost recovery mechanism or pricing methodology that is
mandated serves to promote efficiency and sustainable competition and maximise consumer
benefits. In this regard it may also take account of prices available in comparable competitive
markets.
Where an operator has an obligation regarding the cost orientation of its prices, the burden of
proof that charges are derived from costs including a reasonable rate of return on investment
shall lie with the operator concerned. For the purpose of calculating the cost of efficient
provision of services, the Agency may use cost accounting methods independent of those used
by the operator or the reference value method. It may require an operator to provide full
justification for its prices, and may, where appropriate, require prices to be adjusted.
The purpose of imposing the price control and cost accounting obligation is to ensure fair,
transparent criteria encouraging the development of competition. The operator should apply
72
Article 13 of the Access Directive
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these methods during break-down of costs of the services it provides. Cost accounting shall
refer to a group of rules and procedures ensuring the breakdown of costs, revenue, assets,
liabilities and capital in relation to certain activities and services, particularly taking into
account direct and indirect costs.
The cost-accounting system enables the implementation of the accounting separation
obligation and the verification of cost orientation of prices in order to prevent cross
subsidising, setting too high or too low prices, and inefficient behaviour of the designated
operator.
In order to prevent the occurrence of the competition problem defined in Chapter 6.4.3.2 of
this document where it was stated that HT may, without regulation, cross-subsidise its
services by charging other operators a price for the service of unbundled access to the local
loop that is above costs in order to be able to offer below-cost retail prices thus abusing its
position of significant market power, the Agency imposes on HT the following regulatory
obligations:
• The regulatory obligation of price control including the obligation of cost
orientation of prices, and
• The regulatory obligation to keep cost accounting in relation to the provision of the
service of unbundled access to the local loop.
The Agency thinks that the above-mentioned regulatory obligations would partially resolve all
competition problems laid down in Chapter 6.4.3.2 of this document. These problems could
additionally be resolved by obligations of non-discrimination and accounting separation
which have also been imposed on HT.
Since the Telecommunications Act laid down the obligation of cost orientation of prices and
keeping of cost accounting, the Agency has, in the document „Instructions for accounting
separation and cost accounting “73
defined the methodology of cost accounting to be used by
HT for the calculation of cost oriented prices of its services, among which the service of
unbundled access to the local loop. The Agency may also apply the method of cost accounting
regardless of the method applied by the operator. Therefore, the Agency has planned a project
for the definition of cost-accounting method (cost model) that will be used by the Agency
regardless of the method applied by HT for the purpose of control of cost orientation of HT’s
prices. Until the completion of this project, the Agency will not be able to verify the
alignment of HT’s prices with the regulatory obligations imposed in this Chapter.
Consequently, upon completion of the above-mentioned project, and on the basis of its
conclusions, the Agency shall define a method of cost accounting (cost model) to be used by
the Agency regardless of the method applied by HT. This method will be used to verify the
cost-orientation of prices of the service of unbundled access to the local loop.
The Agency thinks that, until that moment, price control should be based on the reference
values method on the basis of prices on comparable markets pursuant to Article 62, paragraph
2 and Article 62, paragraph 3 of the ECA.
73
which is a constituent part of the decisino of 18 November 2008 (Class: 130-01/06-01/09; Reg.No.: 376-11-
18)
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However, considering competition problems identified in Chapters 6.4.3.1 and 6.4.3.2 of this
document and the Agency’s obligation to, in the transitional period until the implementation
of regulatory obligations defined in this Chapter, that is, until the definition of cost-oriented
prices of the service of unbundled access to the local loop, that is, of all services covered by
the definition of the relevant market given in Chapter 4.3 of this document, ensure fair
competition and prevent HT from abusing its position of significant market power, the
Agency has analysed the situation in the relevant market which is covered by this document
according to types of services making up the relevant market74
.
a) Fully unbundled access to copper-based local loop
Concerning the service of fully unbundled access to copper-based local loop it must be
mentioned that the monthly fee of this service currently amounts to HRK 52.14. The Agency
finds this price reasonable, that is, cost-effective for operators because it allows them to be
highly competitive on the related retail market, which is evidenced by a significantly strong
growth trend of the service of fully unbundled access to the local loop since it first became
available (See Figure 12.). The Agency also thinks that, provided that all other problems on
the market of wholesale network infrastructure access at a fixed location not related to price
are resolved, this price of the service in question is at a stimulating level for other operators
allowing them to continue investing into their won infrastructure, and that there is no need to
change this price until the implementation of a cost-oriented price.
Figure10. Number of fully unbundled accesses to the local loop
655
12.483
37.586
71.748
0
8.000
16.000
24.000
32.000
40.000
48.000
56.000
64.000
72.000
2006/2 2007/1 2007/2 2008/1
Source: Questionnaire for the market of wholesale network infrastructure access
It must be mentioned that the above-mentioned price, at the moment of the adoption of the
decision75
defining the price of the service of fully unbundled access to the local loop, was
calculated on the basis of the difference between retail prices of network access in EU 15 and
wholesale prices for fully unbundled access to the local loop in the same group of countries.
This relation was taken into account by the Agency in order to set below-retail access prices
for fully unbundled access to the local loop in the Republic of Croatia, that is, the Agency set
74
In accordance with the definition of the market given in Chapter 4.3 of this document. 75
Class: 344-01/05-01/145; Reg. No.: 376-05-02-10
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the prices at this level to simulate fair competition at the relevant retail market. The growth
trend in the number of fully unbundled accesses to the local loop, illustrated in Figure 12,
clearly shows that the Agency’s intention was correct, that is, that it achieved the effect it
wanted to achieve.
As it was mentioned above, the Agency thinks that the current price of the service in question
is at a level that encourages operators to invest into their own infrastructure and that it is not
necessary to change this price until the implementation of the cost-oriented price. This
Agency’s position is based on the fact that the purpose for which the price of the service of
fully unbundled access to the local loop in the Republic of Croatia was set was fully justified
(illustrated in Figure 12). It is also a fact that only two European Union Member States have a
lower price of the service of fully unbundled access to the local loop than the Republic of
Croatia76
, which is evident from Figure 13. The Agency’s objective is not to lower the price
as much as possible in order to adversely influence, that is, discourage investments of
operators into their won access infrastructure.
Taking into account all of the above-mentioned reasons, the Agency thinks that, until relations
between retail and wholesale prices remain as they are, the price of the service of fully
unbundled access to the local loop should not be changed until the implementation of a cost-
oriented price in accordance with regulatory obligations imposed in this Chapter.
Figure11. Monthly fee for the service of fully unbundled access to the local loop– EU27 and RoC
5,8
9
6,1
4 7,5
2
7,5
8
7,7
5
7,7
9
7,8
3
8,1
2
8,2
6
8,3
4
8,3
7
8,7
0
8,9
5
8,9
9
9,2
9
9,2
9
9,3
3
9,3
6
9,3
9
9,4
8
9,6
5
9,9
5
10
,05
10
,40
10
,75
16
,43
10
,50
7,3
1
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
Poljska
Estonija
Hrvat
ska
Švedsk
a
Mađ
arska
Litva
Španjo
lska
Nizoz
emsk
a
Velika
Brit
anija
Latvij
a
Slove
nija
Rumunjs
ka
Grčka
Bugarska
Portugal
Belgija
Francu
ska
Austrija
Mal
taIta
lija
Slovač
kaCip
ar
Danska
Finsk
a
Češk
a
Njem
ačka
Luksem
burgIrs
ka
Source: Cullen International „Cross Country Analysis“ – Western Europe since January 2009. and
Central and Eastern Europe since December 2008
The Agency thinks that the prices of other services related to the service of fully unbundled
access to the local loop defined in the reference offer should remain unchanged. The Agency
also thinks that the proposed new prices or altered current prices of other services related to
the service of fully unbundled access to the local loop should be in compliance with
76
Poland and Estonia
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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85
regulatory obligations of transparency, non-discrimination and cost-orientation and based on
actual costs of provided services, including a reasonable rate of return on investments. HT, as
the operator providing the service of fully unbundled access to the local loop, shall be
responsible for proving the justification of prices of these services on the basis of the
mentioned costs.
This obligation was imposed on HT in order to prevent the possibility of leveraging of HT’s
significant market power from the relevant market covered by this document to the
downstream retail market by charging unjustified and unfounded costs of services.
b) Shared unbundled access to copper-based local loop
Concerning the service of shared access to the local loop, it must be mentioned that the
current price of HRK 22.37 was calculated on the basis of the average price of the service of
shared access to the local loop in all EU Member States. As opposed to fully unbundled
access, the calculation of the price of shared unbundled access to the local loop was not based
on the relationship with related retail prices.
Consequently, the Agency thinks that, until the completion of the cost models development
project, the control of prices of shared access to the local loop should be based on the
benchmark method and prices available on comparative competitive markets referred to in
Article 62, paragraph 2 and Article 62, paragraph 3 of the ECA.
In the process of calculating prices of services of shared access to the local loop, the Agency
used the method of benchmarks and prices available on comparative competitive markets,
taking into account the following documents, assumptions and methods
• Cullen International „Cross Country Analysis“ report for Western Europe since
January 2009, and Central and Eastern Europe since December 200877
;
• The amount of the monthly fee for the service of shared access to the local loop in all
Member States of the EU where this service is available78
;
• Removal of external values by means of adequate statistical methods;
• Exchange rate HRK/EUR – the average of the mean exchange rate of the CNB in a six
month period79
amounting to HRK 7.1748.
When analysing benchmarks, the Agency used data provided in the report by Cullen
International „Cross Country Analysis“for the amount of the monthly fee for the service of
shared access to the local loop in all European Union Member States (Table 4) or, more
77
The Agency used the last available data at the moment when this document was put to public consultation a on
2 March 2009, and not the latest data available when the decision on the SMP operation was adopted because the
latest data were not a part of public. 78 The Agency thinks that the relevance/justification of comparable data is the key to the quality implementation
of the benchmark method for the calculation of prices 79
Source http://www.hnb.hr/tecajn/htecajn.htm?tsfsg=c178a2621b885aeab6bd0c4ee5b2d912;
The average of the mean exchange rate was calculated on the basis of the last available official data at the
moment when this document was put to public consultation on 2 March 2009 (period between July and
December 2008)
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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precisely, for Western Europe countries since January 2009, and for Central and Eastern
European countries since December 2009.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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Table 4. Monthly fee for the service of shared access to the local loop – EU27
Country EUR
Netherlands 0.19
Belgium 0.85
United Kingdom 1.55
Poland 1.56
Germany 1.78
Cyprus 1.83
Malta 1.86
Greece 2.04
Czech Republic 2.10
Hungary* 2.25
Portugal 2.51
Italy 2.57
France 2.90
Spain 3.00
Bulgaria 3.02
Luxembourg 3.20
Estonia 3.20
Slovenia 3.27
Sweden 3.75
Latvia 4.13
Romania 4.20
Austria 4.67
Slovakia 4.97
Denmark 4.98
Lithuania 5.46
Finland** 5.93
EU
27
Ireland 8.41
Source: Cullen International „Cross Country Analysis“ – Western Europe since January 2009. and
Central and Eastern Europe since December 2008
Note: * The amount of the monthly fee in Hungary was calculated on the basis of the average of all (5)
amounts of monthly fee for the service of shared access to the local loop..
** The amount of the monthly fee was calculated on the basis of the average of all (2) amounts of
monthly fee for the service of shared access to the local loop
Since in statistical analysis the most common measure of an “average” is the mean value
(arithmetic mean), the Agency decided to calculate this value in order to get the average price
of the service of shared access to the local loop in European Union Member States.
Furthermore, the Agency mentions that it is important to establish the existence of outliers.
Extremely low or extremely high values significantly influence the value of the arithmetic
mean which would result in a non-representative value. To establish these it is necessary to
determine the value of the first or the lower quartile and the third or the upper quartile80
, and
interquartiles81
. On the basis of the above-mentioned statistical indicators, the Agency
80
Quantiles are values of a numerical variable dividing ordered data into q equal parts. Quantiles dividing
statistically ordered data into 4 equal parts are called quartiles. Since in this case the order of quartiles is q=4
there are three quartiles, the first or the lower, the second or the median and the third or the upper. 81
Interquartile is the absolute measure of dispersion. This is a variation range of the middle 50%members of a
series of ordered data.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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determined the lower and the upper extremes in order to determine outliers, that is, values that
could influence the calculation of the mean value (arithmetic mean) that would be poorly
representative of initial values.
Calculation formulae:
• The first quartile: Q1=N/4
• The third quartile: Q3=3N/4
• The interquartile: Iq=Q3-Q1
• The lower extreme: Q1-1,5Iq
• The upper extreme: Q3+1,5Iq
Taking into account the above-said, the Agency thinks that these should be removed when
calculating the arithmetic mean.
Figure 12. Box-plot graph
Median = 3
25%-75%
= (1,86, 4,2)
Non-Outlier Range
= (0,19, 5,93)
Outliers
Extremesdijeljeni izdvojeni pristup
-1
0
1
2
3
4
5
6
7
8
9
Irska
Source: An overview resulting from the Statistica software package
As a result, and in accordance with the conducted analysis of the amounts of the monthly fee
for the service of shared unbundled access to the local loop in the European Union Member
States, it was established that the outlier is the amount of the monthly fee for the service of
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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89
shared access to the local loop in Ireland, and that, in accordance with the above, it was not
taken into account when calculating the median value (arithmetic mean), that is, the average
price of shared access to the local loop in European Union Member States. This is illustrated
in Table 5.
Table 5 Monthly fee for the service of shared access to the local loop in EU27 with marked quartiles and
outliers
Country EUR
Netherlands 0.19
Belgium 0.85
United Kingdom 1.55
Poland 1.56
Germany 1.78
Cyprus 1.83
Malta* 1.86 Greece 2.04
Czech Republic 2.10
Hungary 2.25
Portugal 2.51
Italy 2.57
France 2.90
Spain 3.00
Bulgaria 3.02
Estonia 3.20
Luxembourg 3.20
Slovenia 3.27
Sweden 3.75
Latvia 4.13
Romania** 4.20 Austria 4.67
Slovakia 4.97
Denmark 4.98
Lithuania 5.46
Finland 5.93
EU
26
Ireland*** 8.41
Average price € 2.99
Average price HRK 21,46
Note *first quartile; **third quartile; ***outliers
The median value of all prices for the service of shared access to the local loop in the
remaining 26 European Union Member States amounts to HRK 21.46.
In accordance with all of the above, the Agency imposes on HT the obligation of price control
in the following manner and in compliance with the following rules:
1) HT must, on 1 October 2009, include in the reference offer for unbundled access to the
local loop and related facilities the monthly fee for the service of shared unbundled access
to the local loop amounting to HRK 21.46.
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2) HT must incorporate the new monthly fee for the service of shared unbundled access to
the local loop in the reference offer for unbundled access to the local loop and related
facilities exactly one year after the incorporation of the price referred to under item 1. HT
must, 60 days before the application of the new price for shared unbundled access to the
local loop, carry out the procedure for the verification of the price of shared unbundled
access to the local loop on the basis of the above-mentioned method;
3) HT must, for every subsequent year, carry out the procedure referred to in item 2 until the
moment when prices will be calculated on the basis of the cost accounting method (cost
models) referred to in this Chapter.
Furthermore, taking into account sudden changes in exchange rates caused by the world
economic crisis, the Agency finds it justified to allow both to HT and to the Agency to modify
the price of the service of shared unbundled access to the local loop that will correspond to the
new average exchange rate for the Kuna against the Euro if the average exchange rate for the
Kuna against the Euro changes in the last six months according to the Croatian National Bank
by more than 10% of the exchange rate used by the Agency to calculate the price of the
service of shared unbundled access to the local loop for every year.
In accordance with the above, if the average exchange rate for the Kuna against increases for
at least 210%, HT may modify prices of the service of shared unbundled access to the local
loop thus adjusting them to the average exchange rate for the Kuna against the Euro82
. On the
other hand, in case of a 10% fall in the average exchange rate for Kuna against the Euro, the
Agency will be able to implement a new price for the service of shared unbundled access to
the local loop, which will correspond to the new exchange rate of the Kuna against the Euro.83
The prices of other services related to the service of shared unbundled access to the local loop
defined in the reference offer shall remain unchanged. In the process of proposing new prices
or modification of the existing prices of other services related to the service of shared
unbundled access to the local loop, these prices must be in accordance with the regulatory
obligations of transparency, non-discrimination and cost orientation whereby prices must be
based on actual costs of provided services, including a reasonable rate of return on
82 An example for the first year. If at a certain moment the average mean exchange rate of the Croatian National
Bank for the last six months amounted to the minimum of HRK 7.8923 for 1 euro, HT will be able to change the
price of the service of shared access to the local loop, which was calculated on the basis of the method described
in Chapter 7.1.4 of this document, into the amount in kunas based on the new exchange rate. More precisely, if
this happened in the period of one year after the entry into force of this analysis, the average price of the service
of shared access to the local loop would not be calculated on the basis of the exchange rate of HRK 7.1748 for 1
euro and amount to HRK 21.46, but would be calculated on the basis of the exchange rate of HRK 7.8923 for 1
euro and would amount to HRK 23.60.
83
An example for the first year. If at a certain moment the average mean exchange rate of the Croatian National
Bank decreased in the last six months by at least 10% (1€=HRK 6.4573), compared to the exchange rate applied
by the Agency in this analysis (1€=HRK 7.1748), the Agency will be able to change the price for the service of
unbundled access to the local loop calculated on the basis of the method described in Chapter 7.1.4 of this
document into the amount in kunas on the basis of the new exchange rate. More precisely, if this happened in the
period of one year after the entry into force of this analysis, the average price of the service of shared access to
the local loop would not be calculated on the basis of the exchange rate of HRK 7.1748 for 1 euro and amount to
HRK 21.46, but would be calculated on the basis of the exchange rate of HRK 6.4573 for 1 euro and would
amount to HRK 19.30.
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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investments. HT, as the provider of the service of shared unbundled access to the local loop,
shall be responsible to prove that the prices for these services are justified.
This obligation was imposed on HT in order to prevent the possibility for leveraging HT’s
significant market power from the relevant market which is the subject of this document to the
downstream retail market by charging unjustified and unfounded prices for services.
c) Unbundled access to copper-based local sub-loop
Concerning the service of shared unbundled access to the local sub-loop, in accordance with
the regulatory obligation of access imposed in this document, in case of a reasonable request
on the part of the operator before HT’s fulfilment of the obligation of cost orientation of
prices, the Agency imposes on HT the obligation of to control prices in the following manner:
• HT must, within 90 days from the receipt of a reasonable request, include in the
reference offer for shared unbundled access to the local loop and related facilities a
reasonable price for the service of unbundled access to the local sub-loop relating to a
monthly lease of the sub-loop;
• HT must, within 90 days from the receipt of a reasonable request, include in the
reference offer for shared unbundled access to the local loop and related facilities
reasonable prices for all accompanying services related to unbundled access to the
local sub-loop;
• HT must define all of the above-mentioned prices at such levels that the operator with
the minimum efficiency of HT may offer services to end users without incurring losses
and by earning a reasonable profit;
• HT must deliver the prices of services and the price calculation method to the Agency
15 days before the publication of these prices in the reference offer together with t
detailed elaboration and justification.
If HT does not succeed in presenting its proposal as reasonable and if the Agency deems that
HT’s proposal will not prevent the abuse of significant market power by HT, the Agency may
modify the prices in a special administrative procedure pursuant to the ECA, in accordance
with this analysis and regulatory obligations imposed on HT.
d) Unbundled access to fibre-based local loop by means of point-to-point link
Concerning the service of unbundled access to fibre-based local loop by means of point-to-
point link, in accordance with the regulatory obligation of access imposed by this document,
in case of a reasonable request by an operator before the fulfilment of the obligation of cost-
orientation of prices, the Agency shall impose on HT the obligation of price control:
• HT must, within 90 days from the receipt of a reasonable request, include in the
reference offer for shared unbundled access to the local loop and related facilities a
reasonable price for the service of unbundled access to the fibre-based local loop by
means of point-to-point link referring to a monthly lease for the service of unbundled
access to fibre-based local loop by means of point-to-point link
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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92
• The wholesale price for the service of unbundled access to the fibre-based local loop
must contain a reasonable rate of return on investment in addition to costs84
;
• HT must, within 90 days from the receipt of a reasonable request, include in the
reference offer for shared unbundled access to the local loop and related facilities
reasonable prices for all accompanying services related to unbundled access to the
fibre-based local loop by means of point-to-point link;
• HT must define all of the above-mentioned prices at such levels that the operator with
the minimum efficiency of HT may offer services to end users without incurring losses
and by earning a reasonable profit;
• HT must deliver the prices of services and the price calculation method to the Agency
15 days before the publication of these prices in the reference offer together with t
detailed elaboration and justification.
If HT does not succeed in presenting its proposal as reasonable and if the Agency deems that
HT’s proposal will not prevent the abuse of significant market power by HT, the Agency may
modify the prices in a special administrative procedure pursuant to the ECA, in accordance
with this analysis and regulatory obligations imposed on HT.
e) Collocation services
Concerning the collocation services arising from the regulatory obligations of access, non-
discrimination and transparency, all prices related to HT’s collocation services must be
calculated in accordance with the regulatory obligations of transparency, non-discrimination
and cost orientation in which case prices must be based on actual costs of the provided
services, including a reasonable rate of return on investments. HT, as an operator providing
collocation services, shall be responsible to prove that prices have been based on the above-
mentioned costs.
This obligation was imposed on HT to prevent the possibility of leveraging of HT’s
significant market power from the relevant market dealt with in this document to the
downstream retail market by charging unjustified and unfounded costs of services.
The division of costs related to the preparation of collocation premises and putting them at
disposal shall remain identical to the definition in the Reference Offer for the service of
unbundled access to the local loop.
7.1.5. Obligation of accounting separation85
The Agency may, in accordance with the provisions of Article 56 of the ECA, impose on
operators with significant market power the obligation of accounting separation in relation to
specified activities related to interconnection and/or access.
The Agency may, in particular, require a vertically integrated operator to make transparent its
wholesale prices and its internal transfer prices inter alia to ensure compliance where there is
a requirement for non-discrimination pursuant to Article 59 of the ECA, or, where necessary,
to prevent unfair cross-subsidising.
84 The Agency thinks that the reasonable rate of return does not have to be the same in all cases but it will
depend on whether it was necessary to built new ducts or fibres run through the existing ducts. 85
Article 11 of the Access Directive (eng. Access Directive)
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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93
The manner and procedure of accounting separation may be prescribed in more detail in a
decision of the Agency referred to in Article 56 of ECA.
To facilitate the verification of compliance with obligations of transparency and non-
discrimination, the Agency shall have the authority to demand access to accounting records,
including data on revenues earned in the market, and to publish such information if this would
contribute to an open and competitive market, while respecting rules on confidentiality
provided for in Article 15 of the ECA.
Structural separation and separate accounting of costs of electronic communications services
of operators with significant market power serves to fulfil the legal obligation aimed at
preventing subsidisation of one of electronic communications service on the relevant markets
on which operators have been designated as SMP operators. Accounting separation means
that operator’s activities are separated into separate affairs or services for accounting needs.
The system of separate accounts enables the implementation of the principle of non-
discrimination i.e. of equivalent market conditions which encourages the development of
competition and entry of new operators on the market.
According to provisions of Article 57 of the Telecommunications Act, the obligation of
accounting separation was imposed on HT by force of law when it was designated as the SMP
operator. Paragraph 5 of the above-mentioned Article also prescribes that the Agency’s
Council shall adopt a decision regulating the manner of dividing business activities of
operators with significant market power in terms of their organisation and calculation, and
other related details. In accordance with this, the Agency’s Council adopted a decision on 18
November 200886
mandating on HT how to implement accounting separation and cost
accounting in the manner and within time limits laid down in the document „Instructions for
accounting separation and cost accounting“.
Since it was established in the analysis conducted in this document that HT might, in the
absence of regulation, discriminate against other operators in terms of price as opposed to its
own retail arm or affiliated companies or cross-subsidise services at vertically related markets
thus abusing its position of significant market power, the Agency has decided that the
imposed regulatory obligation must be kept in order to prevent the above-mentioned market
problems, and HT was accordingly mandated the regulatory obligation of accounting
separation in the market of wholesale (physical) network infrastructure access (including
shared or fully unbundled access) at a fixed location.
The Agency thinks that the regulatory obligation of accounting separation will eliminate all
competition problems as defined in Chapter 6.4.3 of this document and all problems which
have not been explicitly defined but might cause same or similar consequences on the market.
The Agency also feels that this will directly resolve the problem of cross-subsidisation, in
combination with the already imposed obligations of non-discrimination and transparency. In
accordance with this, HT has been imposed the regulatory obligation of accounting separation
in order to ensure the implementation of obligations of non-discrimination and transparency
that had already been imposed on HT.
86
Class: 130-01/06-01/09, Reg. No.: 376-11-18
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94
The Agency’s Council has, at it was already mentioned, imposed on HT the obligation of
accounting separation which, among other things, refers to the service of unbundled access to
the local loop, which was defined in the document “Instructions for accounting separation and
cost accounting” under „Segment 3 – Wholesale network infrastructure access (including full
and shared access) at a fixed location“. This document defines the manner of implementation
of accounting separation and cost accounting, and the manner and time limits for their actual
implementation to be applied by HT in practice in order to implement the regulatory
obligation of accounting separation pursuant to the provisions of the Telecommunications
Act.
In this Chapter, the Agency, pursuant of he provisions of the ECA, imposes on HT the
regulatory obligation of accounting separation which is identical to the obligation of
accounting separation the manner of implementation of which was defined in the above-
mentioned Agency Council’s decision on 18 November 2008 Taking this into account, HT
must implement the provisions of this decision referring to the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location,
which was defined in the document “Instructions for accounting separation and cost
accounting” under „Segment 3 – Wholesale network infrastructure access (including full and
shared access) at a fixed location“.
By means of this regulatory obligation HT is mandated, as a verification of the
implementation of obligations of transparency and non-discrimination in relation to the prices
of services defined in the market of wholesale (physical) network infrastructure access
(including shared or fully unbundled access) at a fixed location, to keep and show accounting
data for the market of wholesale (physical) network infrastructure access (including shared or
fully unbundled access) at a fixed location separately from accounting data for other HT’s
activities in order to achieve the transparency of all wholesale prices charged by HT to other
operators for the provided services, and of internal transfer prices charged for the services
provided to its retail arm and affiliated companies. .
When implementing the regulatory obligation of accounting separation, HT must take
particular account of European Commission recommendations and guidelines on accounting
separation.
As it was already mentioned, the Agency imposed on HT the obligation of accounting
separation in order be able to control compliance with the regulatory obligations of
transparency and non-discrimination and in order to prevent cross-subsidising between
services offered by HT. HT is a vertically integrated operator because of which it is important
to have control over internal transfer prices offered to its retail arm in order to prevent cross-
subsidising aimed at leveraging significant market power from the market of wholesale
(physical) network infrastructure access (including shared or fully unbundled access) at a
fixed location to the downstream retail market. Since both the wholesale and the retail service
are offered by the same, vertically integrated, operator, accounting separation is the only way
of control to make sure that the operator is not cross-subsidising and thus vertically leveraging
significant market power..
Obligations imposed by the Agency on the SMP operator must be proportionate with the
benefits resulting from the compliance with this obligation. If the imposition of this regulatory
obligation causes additional costs for HT, the Agency thinks that the benefit from the
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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95
obligation, which is measured by the prevention of violation of regulatory obligations of
transparency and non-discrimination and the prevention of cross-subsidising (because they
could not do it themselves) significantly exceeds costs incurred by this obligation. This
regulatory obligation only serves to verify HT’s compliance with other regulatory obligations
imposed in this document.
7.1.6. Other regulatory obligations that might be imposed by the Agency on the market
of wholesale (physical) network infrastructure access (including shared or fully
unbundled access) at a fixed location, pursuant to ECA
The Agency has also mentioned in Chapter 6.4.2.4 of this document a problem referring to
undue use of information about competitors. This problem does not require the imposition of
a regulatory obligation on SMP operators because this kind of behaviour is prohibited
regardless of the SMP operator status.
In other words, no operator, regardless of the fact whether it has the status of an SMP
operator, may unduly use information about a competitor. This is prescribed in Article 66,
paragraph 5 of the ECA, which explicitly prescribes that Operators which acquired
information from another operator before, during or after the process of negotiating access or
interconnection may use that information solely for the purpose for which it was supplied87
.
For the purpose of effective implementation of regulatory obligations referred to in Chapter 7
of this document, the Agency shall, where necessary, provide the necessary implementation
instructions to SMP operators and they are obliged to comply with these instructions.
87
Article 4 of the Access Directive
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96
8. Annexes
8.1 . Annex A – Opinion of the Croatian Competition Agency
REPUBLIC OF CROATIA
CROATIAN COMPETITION AGENCY
Class: 031-01/2009-01/17
Reg. No. 580-05-09-45-2
Zagreb, 26 March 2009
CROATIAN POST AND ELECTRONIC
COMMUNICATIONS AGENCY
Att: Gašper Gaćina, Chairman of the Agency’s Council
Jurićićeva 13
10 000 Zagreb
Re: Croatian Post and Electronic Communications Agency
- request for opinion on relavant markets
- expert opinion, delivered
The Croatian Competition Agency (hereinafter. the Agency) received on 10 March 2009 a
request from the Croatian Post and Electronic Communications Agency (hereinafter.
HAKOM) asking for the Agency’s opinion on conclusions concerning the identification of
relevant markets pursuant of the Electronic Communications Act (Official Gazette, No. 73/08,
hereinafter: the Act) and proposals of decisions adopted in accordance with these conclusions.
The Agency has examined the proposals for Decisions, and on the basis of the decision of the
Competition Council (hereinafter: the Council), within the meaning of Article 29, paragraph
1, Article 34 and Article 35, paragraph 1, item 6 of the Competition Act, at is session held on
26 March 2009, adopted the following:
O P I N I O N
The proposals for Decisions delivered to the Agency by the Croatian Post and Electronic
Communications Agency are not contrary to the provisions of the Competition Act.
Statement of reasons:
In the public consultation procedure, HAKOM delivered to the Agency the analysis of the
following markets: the market of call origination on the public telephone network provided at
a fixed location., the market of call termination on individual public telephone networks
provided at a fixed location, the market of wholesale (physical) network infrastructure access
(including shared or fully unbundled access) at a fixed location, the wholesale broadband
access market, the market of call termination on individual mobile public communications
network, the market of call transit in a fixed public communications network, the market of
access and call origination from mobile public communications networks, the market of SMS
HAKOM Market Analysis of Wholesale (Physical) Network Infrastructure Access At a
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97
termination on individual mobile public communications network, and the market of publicly
available telephone services in mobile electronic communications networks, as well as
proposals of Decisions based on the above-mentioned analyses.
After having examined the proposals for Decisions, the Agency established that these were
technical documents adopted by HAKOM within its regulatory competence and that they
were not contrary to the provisions of the Competition Act.
However, in actual procedures related to undertakings active in the market of
telecommunications services, the Agency, in each individual case, identifies the relevant
market, which does not have to necessarily coincide with the relevant markets established ex
ante by HAKOM.
Chairman of the Competition Council
Olgica Spevec
(signed)
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8.2 Annex B – Comments on the market of wholesale (physical) network
infrastructure access (including shared or fully unbundled access) at a
fixed location and the Agency’s reply to the delivered comments
8.2.1 Answers to comments made by HT-Hrvatske telekomunikacije d.d.
Answers to HT’s comments follow the Chapter numbers in the document commented on by
HT and the titles of HT’s comments.
4. Definition of a relevant market
4.1.1. Retail market of wholesale broadband Internet access
4.1.2. Demand-side substitution – retail level
The Agency has, in accordance with the definition of the Communication Committee, and for
the purposes of analysis, regarded the access speed over144 kbit/s as broadband access speed
and, on the basis of this and data collected by means of questionnaires, it has defined the ways
in which broadband Internet access service is made available to the end user. HT thinks that
the division of services to those below and above the speed of 144 kbit/s is not satisfactory,
that is, that it is not sufficient to divide electronic communications services to those with
access speed below and above 144 kbit/s. HT states that services with speed above144 kbit/s
include a large group of applications and contents which are very demanding towards
broadband services and, therefore, HT thinks that broadband services could be divided into
several categories, including, for example, services for corporate users, customer support
services, services of multimedia corporate and personal applications, services of multimedia
games, services of other multimedia fun. Each of these categories of services requires a
different range of speed (and quality). Consequently, HT thinks that a comparison of
individual services must be clearly differentiated from the comparison of individual
technologies because of which the analysis of substitutability of individual services must be
separated from the analysis of substitutability of individual technologies, regardless of the
point of view of the analysis. It also claims that the analysis of substitutability of services in
the entire spectrum ranging from 144 kbit/s to 25 Mbit/s might lead to incorrect conclusions.
The Agency disagrees with HT’s proposal that broadband services should be divided into
several categories as proposed by HT since the subject of this analysis is the wholesale
broadband access and not the analysis of individual speeds corresponding to individual groups
of services. As the Agency has already specified in the document, since the demand for the
service of wholesale network infrastructure access at a fixed location results from the demand
for retail broadband access, the Agency thought it would be appropriate to, when establishing
the dimension of services of the relevant market of wholesale (physical) network
infrastructure access (including share or fully unbundled access) at a fixed location, to
determine substitute services on the wholesale market while taking into account the ways in
which operators at the retail market provide the service of broadband Internet access to the
end user.
In other words, the Agency did not divide services into those below and above 144 kbit/s, but
the goal was to establish which ways of broadband Internet access at the retail level used for
the provision of various broadband services may regarded as substitutable because the
demand for these ways of broadband Internet access leads to demand at wholesale level. For
that purpose the Agency had to define a limit above which access speed will be regarded as
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broadband access speed. In this manner the Agency used demand at the retail level to
establish which types of access are regarded by operators as substitutable at wholesale level.
.
The Agency disagrees with HT’s claims that, in the part referring to demand-side substitution-
retail level, the Agency did not apply clear and consistent criteria to establish whether an
individual service is a substitute for the observed service. Substitute services, as it was stated
in the document, are those services to which consumers could easily switch in case of a
hypothetical price increase, and thus satisfy their equivalent need. Therefore, the most
important criteria that the Agency used to establish the substitutability of services were –
price and functionality. In addition to the mentioned criteria, the Agency took into account
other criteria as well, such as service penetration, which only confirms whether services are
substitutable in terms of their price and functionality.
HT states that it is not clearly specified in the Agency’s analysis to which period the analysis
refers to, and that it may be concluded from the examples given by the Agency that the
Agency as a rule takes the current situation to be the period covered by the analysis without
predicting the development of the entire situation in the future. HT thinks that the
development of the current situation in the future should be the basis of ex ante analysis of the
relevant market (i.e. it should be forward looking). HT’s example is that the Agency takes the
speed of 2 Mbit/s as basic access speed, and this is the speed that HT does not even have in its
offer of ADSL access88
and for that reason the mentioned speed cannot represent the Internet
access speed over twisted-pair copper wire with the greatest penetration.
HT’s claim concerning that period covered by the analysis was imprecisely defined is
unfounded because Article 52, paragraph 2 of the ECA reads that the Agency shall carry out
procedures referred to in Article 52, paragraph 1 of the ECA, which include the identification
of relevant markets, the carrying out of market analysis and the imposition of regulatory
obligations on a regular basis, and at least every three years. As a result, the longest period
that the analysis may cover is three years. For that reason the Agency observed the situation in
the relevant market and adopted conclusions while bearing in mind that the next procedure of
the analysis of the relevant market would be carried out in three years time.
However, it must be emphasised that the Agency may at any time again initiate the market
analysis procedure in case of significant changes on the relevant market. In accordance with
Article 52, paragraph 3 of the ECA, operators may request from the Agency to carry out the
market analysis procedures if they make probable the existence of changes which exert a
significant influence on regulatory obligations on the relevant market. Operators may also ask
from the Agency to carry out the market analysis procedure if they make probable the
existence of changes on the basis of which certain operators should have the status of
operators with significant market power.
Furthermore, HT’s claim that future development of the current situation should be the basis
for an ex ante analysis of the relevant market is correct. However, HT makes the wrong
conclusion that the Agency does not analyse the future development of the current situation
since the Agency did take into account the forward looking principle, which is particularly
88
HT has in a relatively short time after the publication of the analysis of the relevant markets and before the
conclusion of public consultation incresed the speed of ADSL access.
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obvious from the fact that the Agency included into the scope of services of the relevant
market services which are based on advanced technical solutions (FttCab and FttH solution).
So, for example, services based on FttH solution, although in the initial stages of the pilot
project, according to HT’s forecasts, should in the time period covered by the analysis, that is,
in three years time at the longest, become very important. For that reason the Agency has,
taking into account the future development of the market, and in order to be able to promptly
react to changes having a significant influence on regulatory obligations on the relevant
market, included services based on advance technical solutions into the dimension of the
relevant market.
Furthermore, in reply to HT’s false claims that the Agency takes the speed up to 2 Mbit/s as
the most frequent access speed, the Agency points out that in section 4.1.2.1.1 of this
document it stated only in the overview of periods covered by questionnaires that the most
frequent basic speed in the entire period, up to the start of public consultation, amounted up to
2 Mbit/s. Therefore, the Agency did not state that the most frequent speed was the one up to 2
Mbit/s, but that the most frequent speed in the entire period covered by questionnaires was the
basic speed. Only for the purpose of an overview of the current situation, the Agency stated
that at that time the basic access speed amounted up to 2 Mbit/s, although in this entire period
the basic speed changed, which is the case now as well when it amounts up to 4 Mbit/s. As a
result, the Agency deems that this HT’s comment was unnecessary, particularly because the
speed of 2 Mbit/s had no relevance in the Agency’s further analysis.
HT thinks that the Agency did not apply the hypothetic monopolist test appropriately in its
analysis, that is, that the Agency only mentions that the above-mentioned test shows when a
certain services is not a substitute service for the observed service. HT thinks hat the Agency
should describe the mentioned test in detail, and show and substantiate by evidence the impact
of the test on the behaviour of end users. HT thinks that the application of the hypothetic
monopolist test in the manner the Agency applies it in the published analysis of the relevant
market does not serve a purpose and that it is flawed since it does not contain the exact data
that would support such a hypothesis made by the Agency.
The hypothetic monopolist test or the SSNIP test is a formal economic test and as such it
substitutes ad hoc definition of the relevant market. The basis of the SSNIP test is a
hypothesis or an assumption, which is why the essence of the hypothetic monopolist test is to
predict, and not to prove. SSSNIP test implies the consideration of a service and a
prediction/assumption/presumption of the influence of a small, but significant, price increase
(5-10%) on sale, and, consequently, on earnings of the hypothetical monopolist, in the
absence of regulation. SSNIP test may be (therefore, it is not necessary or obligatory)
conducted by means of an empirical assessment. The starting point of the empirical
assessment is data collected by market research (survey among users and of the market):
Since market research requires the employment of specialised external agencies, it requires, in
addition to time, certain funds. Since concrete data necessary for the empirical conduct of this
test are very rarely available to national regulatory authorities, and because the existing
regulation is very often sufficiently precise to prevent, that is, avoid the forecast price
increase, we would like to point out that neither the European practice is focused on collection
or presentation of concrete results of the SSNIP test.
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Therefore, according to the IRG’s standpoint89
, SSNIP test is a hypothetical experiment used
by national regulatory authorities very often without adequate information or data (e.g. price
elasticity). In this respect, IRG recognises the usefulness of available/existing data (e.g.
previous price modifications) but insists that the availability of such or similar data may not
be regarded as a conditio sine qua non both for the conduct of the SSNIP test and for market
identification. The SSNIP test should, in the first place, contribute to the finding of the cause-
and-effect links and the adoption of logical conclusions in certain situations in which the
existing data may be used but the existence of such data is not obligatory for a successful
SSNIP test.
In accordance with the above, the Agency has, on the basis of the SSNIP test, given only
those conclusions which are more than obvious because they arise from clear and unequivocal
situations to which the test in question refers in the first place.
4.1.2.1.2. VDSL access over twisted-pair copper wire
HT underlines that in the part on the substitutability between VDSL access over twisted-pair
copper wire and ADSL access over copper wire the Agency did not take into account the
specific HT’s network architecture because of which the provision of VDSL access over
twister-pair copper wire, be it for its own retail arm or for the needs of alternative operators, is
not possible on such HT network infrastructure. HT also states and this is a quote: “The
Agency does not take into account modern trends in the development of ADSL technology and
management of access network and completely ignores its own efforts to increase the
efficiency of ADSL technology evident in the procedure for the preparation of the StaticPlan
and the adaptive power mode“.
The Agency does not agree with HT’s claims and underlines that there are no significant and
important differences between HT’s access network and access networks of the majority of
European countries. These networks have identical structures both on the physical and logical
levels. HT’s access network, as well as access networks of other operators in other countries,
is tree- structured on the physical layer, and a star- structured on the logical layer, meaning
that there is no difference between these networks. HT’s claim would be correct only if the
structure of HT’s network at the physical level would be star-structured, and not tree-
structured. Such an access network model would not allow the sub-loop unbundling, and the
provision of services on the basis of VDSL technology. However, since HT’s network is tree-
structured at the physical level, as well as access networks of other European operators, the
sub-loop unbundling is technically feasible as well as the provision of high-quality broadband
services based on VDSL transfer technology. Therefore, it must be emphasised that the figure
of the schematic presentation of HT’s access network provided on p. 68 of HT’s comments is
not accurate. In other words, that figure shows an access network which is star-structured on,
and not three-structured on a physical layer, which is the case with HT’s access network
structure.
Furthermore, the Agency recognises the fact that HT’s access network, as opposed to the
majority of access networks of Member States of the European Union, is a “rigid type”,
meaning that it does not have installed cable routers – places where elastic switching of local
loops from the secondary to the primary network segment takes place. However, every
«rigid» access network, provided that justified reasons exist and they are, in this case, further
89
Independent Regulators Group
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liberalisation of electronic communications market in the Republic of Croatia, and may turn
into an «elastic» one without major infrastructural interventions. However, the reverse does
not work. An «elastic type» access network may not be transformed into a “rigid type” access
network without major infrastructural interventions (this in principle requires an increase of
capacity in the primary segment of the network).
Therefore, if the operator on the basis of analysis of requests for new services which may not
be provided from the location of the local exchange due to excessive length of the local loop
decides that there are commercial reasons for the provision of these services by installing a
VDSL transfer technology at a certain point of the access network (the sub-loop unbundling
concept) while completely preserving network integrity, there are no technical obstacles to the
realisation of this idea. In case of a «rigid network» it requires only an installation of a new
cabinet at the point in question, which at the same time serves for the termination of the
segment of the primary and of the secondary network and for accommodation of active
equipment. Since this cabinet is installed only to provide high-quality broadband services, it
may be equipped with passive equipment (entrance cables, modules, cross-connect wire, etc.)
fully adjusted to VDSL transfer technology. Countries which have networks of the «elastic
type» use the existing splitters the passive equipment of which is not adjusted for the work of
the mentioned transfer equipment and therefore causes many problems in use, that is, it needs
to be reconstructed.
Therefore, it is obvious that the concept of the «rigid network» is no obstacle for the
introduction of VDSL transfer technology because this kind of network may relatively easily,
by installing a cabinet (a relatively small investment compared to the FttH concept of access
network in the distribution part, without the system of cable ducts), be transformed into an
“elastic type” network. The Agency’s opinion is therefore that when VDSL2 transfer
technology is introduced into the subscriber loop far more attention should be paid to the
problem of preservation of network integrity, while the type of the access network («rigid» or
«elastic») has no bearing.
Consequently, the Agency feels that the introduction of VDSL2 technologies into the access
network is important for several reasons. Innovations in the area of ADSL2plus transfer
technology (spectrum management, different operational modes; L0, L2 i L3, limitations of
the maximum margin value, adding virtual noise, quick speed adaptation), which have already
appeared or will appear in the years to come, will not be adequate to challenges required by
new multimedia services. This in the first place refers to transfer speed, quality of services,
stability, reliability, and resistance of DSL line to the influence of various types of impulse
interferences. Standardisation on dynamic spectrum management (DSM) level 3 for
ADSL2plus technology is not a common practice in the world because it is not economically
justified for this type of transfer technology.
The standardisation of DSM level 4 for VDSL2 technology is in progress and chipset that will
be able to support it expected to appear next year. All well-known producers of DSLAM
equipment are planning to deliver in 2011 VDSL2 transfer equipment which supports DSM
level 3. DSM level 1 is already available at some producers of ADSL2plus transfer equipment
while DSM level 2 will most probably not allow distributed implementation as was the case
with DSM level 1 but only centralised one, which creates additional problems in the
unbundled environment such as the one in the Republic of Croatia. All these facts support the
Agency’s attitude that, in the years to come, ADSL2plus technology will become unable to
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accommodate all users’ requests and that VDSL2 technology needs to be gradually introduced
into the access network.
The introduction of VDSL2 transfer technology into the access network is important also
because of transparent and non-discriminatory behaviour towards beneficiaries in the
evolutionary concept of broadband access networks development based on the symmetric
pair. This concept is today applied exclusively in European Union countries because it does
not endanger the sustainability of beneficiaries. Where VDSL2 transfer technology is not
introduced, the evolution scenario of access network is then based on ADSL2plus technology
meaning that the concept of the opening of new access nodes must be applied instead of the
concept of sub-loop unbundling. This concept in the unbundled environment forces
beneficiaries which have collocations on the existing location of the local exchange to arrange
for collocation premises on a new location and install the necessary equipment at the new
location as well or cede their users to the SMP operator. („take-it-or-leave-it principle“).
On the contrary, in the evolution scenario of sub-loop unbundling the beneficiary may still
supply its users without collocating its equipment at a distant location. Clearly, in this case the
beneficiary may not offer transfer speed equivalent to that provided by the operator with
significant market power from a distant location. In this context beneficiaries still have at their
disposal a complete area of the access network which they had at the moment of adopting a
business decision to realise their collocation at this location but transfer speed they may
provide compared to the operator which collocated equipment at a distant location is several
times slower.
Sub-loop unbundling with ADSL2 transfer technology is not economically justified because,
except for the condition concerning the preservation of network integrity (a condition that
must be fulfilled), there is no significant increase in transfer speed compared to transfer speed
achieved from location of the local exchange and certain investments are required.
.
The Agency, therefore, thinks that further evolution scenario of broadband access networks
based on symmetrical pair must be based on the sub-loop unbundling concept with VDSL2
transfer technology. Only in those access networks which are not unbundled, that is, in those
where the beneficiary did not collocate his equipment in the SMP operator’s local exchange,
should there be the possibility of evolution scenario based on the concept of opening a new
access node with ADSL2plus and/or VDSL2 transfer technologies depending on HT’s wishes
Furthermore, HT pointed out that the Agency stated that VDSL access over twisted-pair
copper wire and ADLS access over twisted-pair copper wire are substitutable services
because this will satisfy the need of users for more quality, faster and innovative services and
it stated that the Agency proved this idea exclusively from a technical perspective without
taking into account the price that the end users will have to pay for the above-mentioned
service. HT also pointed out that the Agency again only mentioned that the hypothetic
monopolist test proved the substitutability of the service without elaborating on it or
supporting its analysis by exact data resulting from the test and therefore, it once again
indicated that the Agency has an inconsistent approach because it did not take into account the
prices of these services as opposed to the analysis of substitutability of other services in this
analysis.
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Consequently, the Agency thinks that the price for services based on VDSL access over
twisted-pair copper wire, in order to create a sufficient level of demand, will not be able to be
much higher than that of services based on ADSL access over twisted-pair copper wire and
users, due to the need for more quality, faster and innovative services, will be ready to pay a
higher price for services based on VDSL access over twisted-pair copper wire. Therefore,
although the Agency cannot know what will be the retail price for the mentioned services, it
feels that the combination of the price and of what is offered for this higher price will result in
VDSL access over twisted-pair copper wire becoming an adequate substitute service for
ADSL access over twisted-pair copper wire. It is the Agency’s opinion that this case does not
represent a switch to a new technology the cost of which is so high for the user that, in spite of
more quality services, the price will represent an insuperable factor that will dissuade the user
from using this service.
The above-mentioned Agency’s position results from the statements on page 19 of this
document where it reads that:„ VDSL access over twisted-pair copper wire represents an
adequate substitute service for ADSL access over twisted-pair copper wire, that is, that the
users are likely, in case of a hypothetical increase in the price of the service based on ADSL
technology, to substitute this service with the service based on VDSL technology. In other
words, services based on VDSL technology will be substitutable with the already existing
services based on ADSL technology because this would satisfy the need of users for more
quality, faster and innovative services. “
Concerning the elaboration related to HT’s comment that the Agency does not support the
hypothetic monopolist test with exact data, the Agency would like to point to the explanation
given on page 93 of this document in the part of the answer to comments related to the
hypothetic monopolist test.
Furthermore, HT points out that the decision on the reconstruction of the access network is a
matter of business policy of the infrastructure operator, and therefore it may not be imposed
by a decision of a regulatory authority, that is, that HT may not be forced to reconstruct its
network based on an Agency’s decision and/or request of other operators. HT states that the
ECA prescribes that operators of public communications have the right of the infrastructure
operator including building, maintenance, development and use of the electronic
communications network, electronic communications infrastructure and the associated
facilities and that it therefore may be concluded that interventions into the access network
may not be a result of an imposed obligation but they exclusively represent a right, that is, a
voluntary, business-related decision of the infrastructure operator.
However, the Agency thinks that HT as the infrastructure operator with significant market
power must develop, upgrade, and thus reconstruct the access network if demanded by the
operator using it provided that this is economically acceptable from HT’s point of view. If HT
were not a vertically integrated operator than this obligation would not be necessary because
this would be in the infrastructure operator’s interest since in this manner it would gain an
additional source of income from the existing network. However, in this case, this is not in the
interest of HT as the provider of retail services or a vertically integrated operator because the
opening of new distant locations for the needs of operators using its services directly
endangers its own position in the market. For that reason HT insists that the decision on the
reconstruction of the access network is a matter of HT’s business policy and may not be
imposed by a decision of a regulatory authority.
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Concerning HT’s comment that its network is already shorter than the usual networks in other
EU countries and that, as such, it is barely long enough to be suitable for switching to VDSL
technology without prior reconstruction (60%of users is within 1000 m) and that, in this case,
the impact of reconstruction would be felt by only 40% of potential users, the Agency stresses
that HT is not consistent because it first states that HT’s specific network architecture is not
suitable for providing VDSL access over twisted-pair copper wire both for its own retail arm
and for the needs of other operators, and then, as the final comment, it states that HT’s
network is already suitable for switching to VDSL technology without prior reconstruction
(60% of users). HT is also inconsistent when it says that the impact of reconstruction would
be felt only by 40% of potential users because it also claims that the reconstruction of the
access network is problematic from the technical aspect considering HT’s network
architecture. All of the above supports the Agency’s conclusion that VDSL access over
twisted-pair copper wire represents an adequate substitute service for ADSL access over
twisted-pair copper wire.
4.1.2.2. Access over mobile networks
HT disagrees with the Agency’s conclusion that Internet access over mobile networks does
not represent a substitute service for ADSL access over twisted-pair copper wire, and it
supports its view by means of criteria given by the Agency when adopting a conclusion that
there is no substitutability between these services.
Concerning (non) coverage as the criterion, HT points out that the Agency neglected the fact
that that ADSL access service is also not available in all parts of the Republic of Croatia due
to the special terrain configuration and the accessibility of the existing network capacity, and
that such areas use precisely access over mobile GSM access (FGSM) to access the basic
service.
The Agency based its conclusions that access over mobile networks does not represent a
substitute service for ADSL access over twisted-pair copper wire on several criteria such as:
access speed, population coverage, price of tariff packages, existence of unlimited packages
and data on distribution of users – private or corporate. Although the Agency adopted this
conclusion on the basis of all of the above-mentioned criteria, the most important criteria used
to establish the substitutability of services are price and functionality. Therefore the Agency
disagrees with HT’s claims that the criterion of (non-) coverage was the main criterion for
substitutability of these services.
In relation to the above-mentioned criterion of coverage and HT’s example of non-availability
of ADSL access service in all parts of the Republic of Croatia (access over FGSM), the
Agency points out that the number of users accessing the basic service over FGSM access is
negligible in relation to the total number of users. It may, therefore, be concluded that the
population coverage of users of ADSL service is significantly higher than the population
coverage by HSDPA signal.
Furthermore, HT disagrees with the Agency’s conclusion that, considering retail prices,
services of mobile Internet access and ADSL access over twisted-pair copper wire are not
substitutable and thinks that the Agency completely ignored the dynamic development of
mobile access market in its analysis and that it based its conclusion on prices valid at the
moment when the analysis was conducted. HT states that the Agency ignored the
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possibility/tendency of price drop on the relevant market of broadband Internet access over
mobile networks and it failed to show in its analysis what would be the impact of this factor
on the market of mobile Internet access.
HT also feels that the Agency’s claim, among other things, that mobile Internet access is not a
substitutable service for ADSL access over twisted-pair copper wire because „as opposed to
tariff packages offered for ADSL access over twisted-pair copper wire, users of broadband
Internet access over mobile networks do not have the possibility to choose unlimited
packages“, is only partially correct. This claim reflects the situation on the relevant market
only at the moment when this analysis was conducted, and the Agency did not take into
account the fact that this was a dynamic market which is very flexible in relation to the end
users’ demand. In this respect, HT says that the Agency claims in its analysis that there was a
growth trend noticed in relation to the share of users of unlimited packages, while the number
of users using basic packages including 1GB is on the decline.
In relation to this, the Agency states that it adopted certain conclusions on the basis of current
data/prices, which is the usual practice in case of market analysis. The Agency agrees with
HT’s claim that a dynamic development of the mobile access market needs to be taken into
account, as well as possible tendencies of a more significant price fall. However, the Agency
thinks that there are significant differences in prices and that in the time period covered by
this analysis there will be no significant price fall, particularly if one takes into account the
price of additional traffic (an additional GB of traffic in tariff packages offered on the basis of
mobile Internet access is between HRK 204.80 and 286.72, while in tariff packages based on
ADSL access over twisted-pair copper wire it amounts to HRK 20.00), which is why, among
other things, the Agency concluded that these two services are not substitute services.
However, the Agency will, as it already stated in this document, follow the future
development of the above-mentioned services, including its prices, and, where necessary, it
shall included the changes in the relevant market dimension.
In relation to the Agency’s claims that the majority of users of Internet access over mobile
networks are corporate users which is why the Agency concluded that this service is not a
substitute service for ADSL access over twisted-pair copper wire, HT feels that, quote: „the
service of broadband access over mobile networks does not include such specific elements
that would require the end users of this service to be the distinguishing factor“. This service is
available under equivalent conditions to both corporate and private users and its functionality
satisfies all needs of business and private end users in terms of mobile Internet access.
In conclusion, the Agency claims that the fact that the service of mobile Internet access is
primarily used by corporate users for whom mobility is very important was mentioned in the
first place as an additional criterion for substitutability, that is, in order to substantiate the
conclusion that this service does not represent a substitute service for ADSL access over
twisted-pair copper wire, which is mostly used by private users.
4.1.2.3. Fixed wireless access
4.1.2.3.1.Fixed wireless access over the Homebox service
HT thinks that the Agency incorrectly included the Homebox service into fixed wireless
access. Homebox service is provided on the basis of a technology used in mobile networks,
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and, for that reason HT thinks that the Homebox service should be considered in the part on
mobile Internet access.
The Agency regards Homebox service as a service provided by means of fixed access to the
telecommunications network with the use of the radio-frequency spectrum intended for
mobile networks GSM and UMTS, that is, it is a service of fixed wireless access in the mobile
telecommunications network with the use of the radio-frequency spectrum. As a result, and
considering the definition of the service in question, HT’s proposal that this service should be
regarded as a mobile access service is unfounded. Therefore, if the Agency accepted HT’s
proposal that this service may not be regarded as mobile access service, the Agency would not
be consistent in its positions. It must also be emphasised that HT’s service of fixed GSM
access (FGSM) is also regarded as fixed wireless access service and it uses GSM frequencies
i.e. mobile network in other to access a fixed network.
In relation to other HT’s comments concerning fixed wireless access over Homebox service,
which are identical to comments related to mobile access, the Agency refers to explanation
given in this part of the answers to comments. Furthermore, the reply to HT’s comment that
the Agency did not describe in detail the conduct of the hypothetic monopolist test is given by
the Agency on page 98 of this document in the part of the answers concerning hypothetic
monopolist test.
4.1.2.3.2. Fixed wireless access over WIMAX technology
HT thinks that the Agency made a wrong conclusion that access over WIMAX technology
and ADSL access over twisted-pair copper wire may not be regarded as substitute services
and that the Agency does not systematically apply adequate and equivalent criteria to
establish whether individual services may be regarded as substitute services from the retail
aspect.
It must be emphasised that the Agency used a series of criteria to establish whether a certain
service represents a substitute service for ADSL access over twisted-pair copper wire,
although the most important criteria on the basis of which the Agency established the
substitutability of services were – price and functionality. In this case the Agency considered
the number of users of the broadband Internet access service over WiMAX technology as one
of the indicators together with problems faced by operators when introducing WiMAX
technology, and, on the basis of this, it concluded that, in the time period covered by this
analysis, due to the mentioned problems (lack of standards, expensive terminal equipment,
insufficient quality), the service in question will not have a significant number of users of
broadband Internet access. However, the Agency will, as it already stated in the document,
continue to follow further impact of this service on the broadband Internet access in the
future.
4.1.2.5. Access over leased lines
HT thinks that precisely because of its functionality, that is, because it allows high speed and
continuous Internet access, the service of access over leased lines represents a substitute
service for ADSL access over twisted-pair copper wire.
The Agency may agree that access over leased lines, considering its functionality, could
represent a substitute service for ADSL access over twisted-pair copper wire. However,
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precisely because of this functionality, that is, because of the fact that the users of service of
access over leased lines have better quality and more possibilities when using the service,
there is a significant price difference. Because of this significant price difference, the majority
of users are not, that is, would not be interested in the above-mentioned services, except for
big corporate users, since they are not prepared to pay for functionality which they in reality
do not even need. Furthermore, according to the Recommendation on relevant markets and
the European practice, leased lines represent a separate relevant market.
4.1.2.6. Access over optical cables
HT thinks, on the basis of criteria such as price and availability that the service of access over
optical cables is not, and may not be, substitutable with the service based on copper
infrastructure. More details can be found in the part of HT’s comments referring to regulatory
obligations proposed by the Agency.
In the first place, the comment of H1 telecom needs to be mentioned saying that the concept
of „optical cable“ compared to „twisted copper pair“needs to be explained because a twisted
copper pair is a constituent part of a copper cable, and the question is why access will be
made over optical cables (to one user with more fibres). The Agency accepted the proposal of
H1 telekom, and in the entire document, the concept „optical cable“ was, where appropriate,
replaced by the concept „optical fibre“.
On the basis of the conducted analysis and HT’s plans and announcements about the
introduction of infrastructure based on FttH/FttB solutions – fibre to the home / fibre to the
building and the connection of 50,000 users by the end of 200990
, the Agency thinks that
services of broadband Internet access over optical fibre will have a significant influence on
competition at the retail level already this year. In other words, these services will be
substitutable with the existing services based on ADSL technology because they will satisfy
the need of users for more quality, faster and innovative services. Since optical fibres permit
higher transfer speed than DSL technologies, which enables the provision of high-quality
services and supports advance IP applications, such as, for example, HDTV (High Definition
Television), the Agency expects an increase in the number of end users to whom the operators
will provide the service of broadband Internet access over optical fibre, that is, the number of
end users who will be willing to pay a higher price for a more quality service. Therefore, the
Agency still thinks that the service of broadband Internet access over optical fibre is a
substitute service for ADSL access over twisted-pair copper wire.
It must be emphasised once again that, while conducting the analysis of impacts and market
development, the Agency took into account the expected market development (so-called
forward-looking principle), which is also recognised by the European Commission and by
other regulatory authorities when regulating the market in question.
4.1.6. Conclusion on the relevant market in the dimension of services
90
90
Lider, 24/04/2009
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Concerning HT’s comment that the service of unbundled access to the local sub-loop may not
be a part of the relevant market because there is no such service in HT’s electronic
communications network due to HT’s specific network infrastructure, the Agency maintains
its position concerning VDSL access over twisted-pair copper wire referred to in p. 99 of this
document. Therefore, the Agency dismisses as incorrect HT’s claims that the service of
unbundled access to the local sub-loop may not be a part of the relevant market because there
is no such service in HT’s electronic communications network due to HT’s specific network.
The Agency thinks that further evolution scenario of broadband access networks based on
symmetrical pair must be based on the sub-loop unbundling concept with VDSL transfer
technology, which is the case in other European Union Member States.
Furthermore, HT thinks that the service of virtual collocation should not be a part of the
relevant market of wholesale (physical) access at a fixed location because this service has not
been sufficiently clearly defined and there are no significant examples in the practice of EU
countries. HT also stated that it did not receive any requests from beneficiaries for the
provision of such a service meaning that there is no need for such a service.
The Agency finds HT’s comments concerning the service of virtual collocation vague and
general. The service of virtual collocation has been defined in the market analysis, in the
Ordinance on reference offers and in HT’s RIO for the service of unbundled access to the
local loop as a collocation at the premises of the operator offering the service of collocation
and the beneficiary does not have access to the equipment necessary for the service of
unbundled access to the local loop but this equipment is accommodated, installed, maintained
and run exclusively by the operator offering the collocation service. Article 6 of the
Ordinance on reference offers also prescribes the basic content of reference offers, and the
service of virtual collocation makes a constituent part of the reference offer for unbundled
access to the local loop and related facilities.
It must be emphasised that HT had no comments or objections to the service of virtual
collocation during public consultation on the Ordinance on reference offers, and therefore the
Agency does not understand why it has the need to comment now. Furthermore, pursuant to
the Regulation (EC) 2887/2000 of the European Parliament and the Council of 18 December
2000 on unbundled access to the local loop, the service of virtual collocation has been defined
as a constituent part of the collocation services, that is, of the service of unbundled access to
the local loop.
4.1.3. Demand-side substitution – wholesale level
The service of unbundled access to the local loop based on advanced technical solutions in the
access network (Fiber to the Cabinet)- unbundled access to the local loop.
HT disagrees with the Agency’s conclusion that the service of unbundled access to the local
loop based on the concept of optical fibre to the street cabinet (Fiber to the Cabinet) may be
regarded as a substitute service for the service of wholesale (physical) network infrastructure
access (including shared or fully unbundled access) at a fixed location. HT claims that the
Agency did not take into account the configuration of HT’s network or the fact that this is the
reason why the service of unbundled access to the local sub-loop does not exist at the
wholesale level since it is not technically feasible to shorten the twisted copper pair and install
street cabinets. HT also stresses that the Agency did not take into account the principle of
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proportionality because the costs of necessary investments exceed the benefits that could be
achieved.
Concerning the above-mentioned comment, the Agency refers to the explanations provided in
the part of answers to the comments concerning VDSL access over twisted-pair copper wire
on page 99 of this document.
5.2. Control of infrastructure in case of significant problems for infrastructure competition
HT states, quote: „building a new one and/or extending the existing network regardless of the
used technology (copper or optic) is difficult for HT for the same reasons for which it is
difficult for new operators and represents high sunk costs for HT as well “. HT disagrees with
the Agency’s claim that investments into new generation networks, that is, the running of
optical cables through within the existing access infrastructure to the street cabinet or to the
end user’s premises, represents a small share in total costs of the building of access
infrastructure while costs of civil engineering works make up about 50-80% in total costs of
building access infrastructure. Having in mind the institute of sharing of the existing
infrastructure, alternative operators have, as opposed to HT, additional possibilities to reduce
costs of civil engineering works precisely by using the existing HT’s infrastructure.
Therefore, HT thinks that in the relevant market: “because of the legal obligation to allow the
sharing of existing infrastructure, control of infrastructure does not represent a significant
competition problem for HT’s competitors“. HT also disagrees with the Agency’s claim about
the strengthening of position in the relevant market by investing into the access optical
network because the capacity for running new cables though the existing infrastructure is very
limited as a result of the unresolved situation in the existing infrastructure which results from
unauthorised use of the infrastructure by other operators and inefficient sanctioning of such
behaviour by competent authorities. Therefore, HT states that, concerning new investments
into the access optical network, HT has to start from the very beginning. Since operators
already have already placed an optical network through the existing HT’s electronic
communications equipment and associated facilities, it may be concluded that they have a
certain advantage in relation to HT.
The Agency disagrees with HT’s claim in relation to the equality of position, that is, of the
existing HT’s„situation“ and the situation of new operators in relation to the rolling out of the
new optical access network. Concerning the rolling out of a completely new electronic
communications infrastructure and networks, HT and new operators are equal in terms of
costs and return on investment, but HT is at a significant advantage if it uses the existing
routes because it does not have to obtain any building permits. HT has only costs of
construction, extension and material, and new operators have additional costs for payment of
lease for free space and costs related to the contracting of the lease. HT currently possesses
many kilometres of access infrastructure while new operators have to either lease the ducts
from HT or roll out their own access infrastructure. When building infrastructure, the costs of
civil engineering works make 50-80% of total costs of rolling out access infrastructure
(Explanatory memorandum p. 17).
Furthermore, HT disposes of the infrastructure enabling access over twisted-pair copper wire
to a large number of end users in the Republic of Croatia, even in those territories where
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access to end users is difficult. The Agency therefore thinks that investments into optical
access network will allow HT to strengthen its market position since in most cases it already
has a built access infrastructure through which it will run optical fibre-based access network,
which puts it at an advantage compared to new operators, meaning that HT’s claim that
concerning new investments into optical access network, it has to start from the very
beginning is unfounded. Consequently, the Agency thinks that in the period covered by this
analysis no operator will be able to replicate HT’s network infrastructure and thus endanger
its market position in the relevant wholesale (physical) network infrastructure access at a
fixed location.
Further to HT’s claims of a very limited capacity for the running of new cables though the
existing infrastructure because of an unclear situation in the existing infrastructure, the
Agency thinks that there is still enough free space in the existing infrastructure but HT has to
start applying new building technologies which significantly increase the rationality of use.
The Agency is stimulating and imposing such innovations in the Ordinance on the manner
and conditions of access and sharing of electronic communications infrastructure and
associated facilities for the purpose of promoting competition.
It follows that HT’s claim that it might be concluded that new operators have a certain
advantage because they have already placed an optical network through the existing HT’s
electronic communications infrastructure is completely unfounded. HT states in its comments
that new operators possess about 5,000 km of their own infrastructure while on the other hand
HT has significantly more kilometres of optical network and this number is, in accordance
with the published plans, increasing at a rapid pace. Also, in case of comparison of the size of
optical networks, in this case only the access part of the network should be compared.
In conclusion, the Agency thinks that, on the basis of infrastructure control, HT will
additionally strengthen its market position by investing into the optical access network.
5.6. Level of vertical integration
HT disagrees with the Agency’s claim that vertical integration and control over infrastructure
permit, in the absence of regulation, the abuse of significant market power, and it claims that
this means that ex ante regulation is necessary in any market where there is a vertically
integrated operator. HT stresses that vertically integrated operators exist in other activities as
well and the abuse of significant market power is prevented by means of the institute of
prohibition of abuse of the dominant position in the relevant market through the application of
general competition regulations.
The Agency insists that the assessment of the existence of one or more operators with
significant market power is a constituent part of the market analysis procedure. The
designation of SMP operators is, in addition to the calculation of the market share on the
relevant market, based on the application of various criteria laid down in Article 55,
paragraph 3 of the ECA, one of which is the level of vertical integration.
The Agency assessed that HT had significant market power on the basis of a high market
share which was stable in the observed period and amounted to 100%. However, since HT is a
vertically integrated operator active on the relevant market of wholesale (physical) network
infrastructure access (including shared or fully unbundled access) at a fixed location, and on
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the retail broadband Internet access market, and taking into account the fact that a company
Iskon Internet d.d., which is 100%-owned by HT, is also active on this retail market, the
Agency has based its conclusion on the existence of significant market power, among other
things, on a high level of vertical integration that HT has on the relevant market in question.
Therefore, HT makes an unsubstantiated claim that it may be concluded from the Agency’s
statements that ex ante regulation is necessary on any market on which there is a vertically
integrated operator since the level of vertical integration is only one of the criteria on the basis
of which the Agency concluded that HT had significant market power on the relevant market,
as it was stated in Chapter 5.7 of this document. It must also be emphasised that vertical
integration may not by itself be the only and sufficient criterion for the assessment of
significant market power. If that were the case, i.e., if vertical integration were the only
criterion, all operators with their own infrastructure would automatically be designated as
SMP operators.
6. Competition problems
HT states that the Agency only listed the possible competition problems, as theoretical
models, without concrete examples and links with particulars of the Croatian market of
wholesale (physical) access to network infrastructure (including shared and fully unbundled
access) at a fixed location and imposed all existing regulatory obligations accordingly. It also
mentions that claims such as “Without regulation, HT might abuse different forms of
unjustified requests to influence business decisions and costs ….“, „without regulation, HT
might ask for certain information from the potential and existing competitors …“ may not be
regarded as evidence of the existence of a competition problem or serve as an argument to
impose regulatory obligations because the Electronic Communications Act itself prescribes
that regulatory obligations must be based on the nature of the recognised market problem and
must be proportionate and justified depending the goal wished to be achieved by regulation.
HT underlines the following quote: „…according to the new regulatory framework, the need
for the imposition of a regulatory obligation needs to be proven, which the Agency did not do.
This may be supported by the European Commission Explanatory Memorandum
accompanying the Recommendation on relevant markets of December 2007, page 10, where it
is stated that anticipated events, which serve as a basis for regulatory decisions, must be
expected within a meaningful timeframe and on the basis of concrete elements (e.g. business
plans, investments made, new technologies being rolled out) rather than something which
may be theoretically possible.“ HT stresses that, when it comes to the imposition of new
regulatory obligations, the Agency must prove the existence of a concrete competition
problem, not only anticipate possible scenarios.
Further to the above-mentioned comment the Agency gives the following reply:
In order for the Agency to be able to fulfil its duties referred to in Article 56, paragraph 3 of
the ECA, that is, impose regulatory obligations on SMP operators on the basis of an
established market problem and according to the principle of proportionality, it must take into
account competition problems, which include the existing competition problems and the
anticipated problems that might appear if the Agency does not regulate the market in which it
established the existence of operators with significant market power. The identified market
problems represent an “illness” of the market, and regulatory obligations represent a “cure”
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for the identified “illnesses”. The Agency must ensure the imposition only of those regulatory
obligations that are necessary for the resolution of certain market problems.
According to the principles of ex ante regulation, the Agency carried out an analysis of the
occurrence of possible problems. All problems dealt with in this document refer to HT’s
actual behaviour, possible behaviour and behaviour that HT might, because of its market
position, apply in practice. The objective of ex ante regulation is to prevent certain behaviours
of operators with significant market power. On the contrary, if the regulation concerned only
those behaviours that must first occur in practice, the regulator would always be a few steps
behind the SMP operator thus failing to fulfil the objective and purpose of regulation. Agency
also points out HT’s inconsistency. HT stated in this part that business plans are necessary as
evidence that certain behaviour would happen, while in case of the intent to regulate access
over optical fibre due to a pilot project of introduction of optical fibre to end users, HT
explains that this is not in compliance with practice. Therefore, HT is not consistent and
changes its position depending on the situation.
Furthermore, HT makes an incorrect claim that all possible competition problems have only
been listed in theory regardless of the actual situation. In Chapter 6.3 of this document the
Agency listed all possible problems identified in European regulatory practice, and in Chapter
6.3 of this document it provided detailed explanations which of the mentioned problems
might occur on the relevant market in question. Thus the Agency explained that nine different
problems might occur in the market of wholesale (physical) access to network infrastructure
at a fixed location. These problems might, each in its own way, slow down or completely
hinder further development of the electronic communications market in the Republic of
Croatia. This could happen because HT, as the SMP operator, might abuse its dominant
market position.
Taking all of this into account, the Agency has, on the basis of the principles of
proportionality and justification, imposed those regulatory obligations that will resolve all
problems that might occur in the market.
Consequently, the Agency thinks that it sufficiently elaborated on all of the problems, both
those that have already occurred in practice, and those that might, without regulation, occur
on the relevant market described in this document.
7. Regulation obligations of the SMP operator.
7.1.1. Obligation of access to, and use of, specific network facilities
HT stresses that the Agency must, when imposing obligations referred to in Article 61,
paragraph 3 of the ECA, in particular when assessing whether these obligations are
proportionate to regulatory principles and objectives referred to in Article 5 of the ECA, take
into account the criteria referred to in Article 61, paragraph 5 of the ECA.
The Agency has, when imposing obligations referred to in Article 61, paragraph 3 of the
ECA, as part of the obligation of access, been very careful to keep the obligations
proportionate to regulatory principles and objectives referred to in Article 5 of ECA, that is, it
took into account the criteria referred to in Article 61, paragraph 5 of the ECA. Considering
the degree of market development, the Agency feels that the service of unbundled access to
the local loop and all proposed obligations are technically and economically feasible, taking
into account the available capacity of the operator. Thus, for example, when the Agency
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imposed the obligation of fully unbundled access to the local loop and local sub-loop, it first
analysed whether this obligation was technically and economically feasible and whether there
is sufficient capacity, which was finally supported by the statements in the analysis of this
relevant market.
The Agency also thinks that the ECA, other laws any bylaws (e.g. ordinances, general
business terms and conditions, the Civil Obligations Act) and reference offers, depending on
each individual case, ensure long-term protection of competition through rights and
obligations of every operator on the market and that every operator has equal opportunities to
the return on investment in a certain period of time (which is, for example, obvious when the
service of unbundled access to the fibre-based local loop was being imposed where the
Agency recognised that the wholesale price for unbundled access to the fibre-based local loop
must, in addition to costs, contain a reasonable rate of return on investments provided that it
depended on whether it was necessary to built new cable ducts or optical fibres run through
the existing cable dusts.
Furthermore, HT states that the Agency never explained the regulatory measure (“use of
specific network facilities”) i.e. it is not clear what this measure means and what are these
“specific network facilities” nor it explained the results of the Analysis it must conduct
pursuant to the above-mentioned Article 62, paragraph 2 of the ECA. For that reason, it is not
possible to verify whether this obligation is “proportionate and justified”.
The Agency pointed out that, pursuant to obligations referred to in Article 61 of the ECA, as
part of the obligation of access to and use of specific network facilities, it followed the
wording of the law. Therefore, paragraph 1 of Article 61 imposes the possibility to prescribe
“to meet reasonable requirements for access to and use of specific network elements and the
associated infrastructure and associated facilities “. Also, paragraph 3 of the above-
mentioned Article, among other things, prescribes the possibility of “access to specific
network facilities and/or equipment, including unbundled access to the local loop”.
It was the Agency’s intention on page 60 of this document to list all obligations imposed to
HT as part of the obligation of access pursuant to Article 61, paragraph 3 in relation to
paragraph 1 of the above-mentioned Article of the ECA followed by a detailed explanation of
each obligation on the basis of the above-mentioned legal basis. Therefore, the Agency
stresses that on p.61 of the analysis it explains in detail which obligation it imposes on HT
pursuant to Article 61, paragraph 3, item 1 of the ECA, that is, that it imposes on HT the
obligation to: …provide to other operators access to the unbundled copper-based local loop
and sub-loop and access to the unbundled fibre-based local loop by means of the point-to-
point link and access to related facilities necessary for full or shared unbundled access to the
local loop or sub-loop “.
However, in order to eliminate all possible ambiguities, the Agency amends the text of the
analysis on page 60 and replaces the text „to provide to a third party access to specific
network facilities and/or equipment, including unbundled access to the local loop and sub-
loop covered by the market definition in Chapter 4.3 of this document and access to related
facilities necessary for full and shared unbundled access to the local loop or sub-loop“, with
the text „to grant to a third party access to the local loop and sub-loop covered by the market
definition in Chapter 4.3 of this document, and access to related facilities necessary for full
and shared unbundled access to the local loop or sub-loop ;“.
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Furthermore, HT states that the Agency does not explain the content of the proposed
obligation to allow grant access to operational support systems or similar software necessary
to ensure fair competition in the provision of services (p.61 of the document), and it is
therefore not clear to which “operational systems” this obligation refers.
This HT’s claim is unfounded because the Agency explained in detail on p. 65 of this
document which obligation it proposes for HT in accordance with Article 61, paragraph 3,
item 8 of the ECA, which refers to the granting of access to operational support systems or
similar software necessary to ensure fair competition in the provision of services. It is the
obligation to allow access to operational IT systems in accordance with international
standards, via WEB interface allowing access to certain information, which was mentioned by
the Agency in its analysis. .
Furthermore, the existing HT’s RIO for the service of unbundled access to the local loop
already allowed operators to have insight into the information in question over a WEB
interface. Furthermore, this is also necessary because the operator may follow its requests (the
process) such as, for example, request for the repair of a malfunction or a request for he
unbundling of the local loop allowing the operator to provide timely and accurate information
to its users. Therefore, the Agency thinks that this obligation should be kept.
Unbundled access to the local loop
HT thinks that the service of leasing dark fibre and leasing of wavelength should be exempt
from regulation by Agency since HT does not provide such services commercially to anybody
else. HT states that these leasing services are a novelty on the Croatian market and that, as
such, they should have the status of a new product.
The Agency disagrees with HT’s claims that this obligation is unfounded, disproportionate
and unjustified because it represents, as it is stated by HT, an usual way of regulating the
relevant market in individual EU countries (Portugal, Finland, Ireland, Denmark, Spain,
Belgium, Germany) and, if there is no room in cable ducts, the SMP operator must allow
access to all passive network parts (e.g. lease optical fibre without transfer equipment).
HR also did not explain why it is not technically feasible to lease optical fibre without transfer
equipment, that is, to ensure VVDM access over fibre used by HT for self-supply, but only
generally adds that it is not applicable in the Croatian electronic communications market
because HT does not offer this service at all to third parties on a commercial or regulated
basis. The fact that HZ does not offer this service to third parties is not a reason not to
regulate this service because this service is necessary to provide, in case of unbundled access
to the local loop, equivalent service as the one provide by HT to its retail arm. We would like
to add that these HT’s services will be obligatory in cases where the local sub-loom would be
unbundled, that is, where it installed its own street cabinet.
This HT’s views clearly show that HT advocates such an evolution scenario for the
development of broadband fibre access networks of new generation according to which every
operator must built its new network in one geographical area, while the Agency advocates the
concept of one single universal broadband access network which will satisfy the needs and
requirements of all operators on the market. Since the cost component of the building of
optical access network is not negligible compared to overall costs it follows that the evolution
concept of the development of the access network advocated by HT, that is, several access
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networks in one geographical areas always ends up being more expensive than one single
network, which does not ensure the possibility for uses of services to enjoy the advantages in
terms of prices of services, that is, it does not contribute to competition in the provision of the
activity of electronic communications networks and services.
By imposing this obligation, the Agency wished to create preconditions for individual users to
get the type of broadband services that they otherwise would not be able to get thus extending
the availability of offer of broadband services to a larger number of users and contributing to
further liberalisation of the electronic communications market in the Republic of Croatia.
Therefore, in cases when the replacement of the copper wire by optical fibre in the access part
of the network is not economically justified, it is to be expected that the introduction of new
broadband services will be based on the concept of the shortening of the twisted copper pair
to the street cabinet or some other concentration point, which will allow other operators to
offer more advanced, more quality and innovative broadband services where economically
justified, while keeping their network integrity.
This allows users with a long local loop to use quality broadband services. The Agency thinks
that significant transfer capacity will remain unused if this issues is not adequately regulated,
and many users will not be satisfied with the level of offered broadband services.
It is important to mention here that the concept of sub-loop unbundling, that is, the shortening
of the local loop, serves to prepare the existing access network for the implementation of
VDSL2 transfer technology with DSM3. We would like to point out that more significant
impacts of increased access speed with the introduction of DSM3 may be expected in the
existing circumstances only on local loops which are shorter than 500 m.
Furthermore, HT finds the proposed obligation according to which HT must enable the
operator to install a street cabinet at some point of HT’s access network based on its business
decisions although HT does not have or does not plan to install its own street cabinet at this
point unjustified and disproportionate, and HT thinks that this obligation exceeds scope of
regulation and liberalisation of the relevant market.
By introducing his obligation the Agency the Agency wished to create preconditions for
individual users to get the type of broadband services that they otherwise would not be able to
get thus extending the availability of offer of broadband services to a larger number of users
and stimulating investments into the access segment of the network in order to contribute to
further liberalisation of the electronic communications market in the Republic of Croatia,
which is the Agency’s main task.
Therefore, in cases when the replacement of copper wire with optical fibre in the access part
of the network is not economically justified, it is to be expected that the introduction of new
broadband services will be based on the concept of the shortening of the copper wire and
replacement with an optical cable to the street cabinet or some other concentration point,
which will allow other operators to offer more advanced, more quality and innovative
broadband services where economically justified, while keeping their network integrity.
This allows users with a long local loop to use quality broadband services although HT does
not have or does not plan to install its street cabinet at this point
Furthermore, HT draws attention to the fact that there are no examples of this kind of
obligation in the practice of EU countries and that, quote: „HT would be obliged to intervene
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in its network at points indicated by the beneficiary regardless of the HT’s network structure,
and it may be concluded that beneficiaries would de facto be running the network, and not HT
as the infrastructure operator..“
The Agency finds these comments completely unreasonable. It must be taken into account
that, through this obligation, the Agency envisaged the possibility for the operators to install a
street cabinet at some point of HT’s access network, under supervision of HT’s employees,
provided that the location where the beneficiary will install the street cabinet complies with
certain technical requirements (agreed with HT), and the equipment installed in the cabinet
completely protects network integrity (in agreement with HT), that is, it does not cause the
degradation of services provided from the local exchange.
Taking into account the number of users that may be covered by a sub-loop it is to be
expected that in certain locations there will be no business plans for two operators at the same
sub-loop location. For this reason, and if operators are allowed to go only where HT has
already installed its street cabinet, the service of unbundled access to the local loop will not
become functional. However, the manner proposed by the Agency creates a possibility for the
functioning of the provision of services over unbundled access to the local loop because
alternative operators will profit from engaging into this business operation.
Furthermore, HT thinks that the obligation of providing access to the local sub-loop (which
implies the necessary building of sub-loops) is unjustified because the building of street
cabinets will not result in greater access speed..
This HT’s claim is completely technically unjustified because it has been proven that the
introduction of VDSL technology, which is one of the technologies allowing the realisation of
the FttCab concept, offers the greatest access speed among all DSL technologies. The
equivalent of VDSL2 is a transfer service supporting transfer speed of 100 Mbit/s in both
directions in the range of 300m. This technology also represents a logical evolution step in the
development of DSL technologies since end users are becoming increasingly demanding in
relation to transfer speed. In this scenario, ADSL (with its variants ADSL2 and ADSL2+)
might perform poorly in a complex environment requiring simultaneous transfer of voice
technology, interactive video and fast data services. In such network scenarios, where
operators prefer a combination of optical fibre and copper wire, VDSL becomes a logical
choice.
HT states that, quote: „the benefits from the introduction of street cabinets into the existing
copper network would be only incremental, while total costs necessary for the introduction of
street cabinets in the entire network, which would be borne by alternative operators, would
amount to almost HRK 900 million.“ In this respect, HT thinks that alternative operators who
will have to bear all the expenses will not have neither interest nor need to access the local
sub-loop in this manner considering other, more affordable types of network access.
The Agency stresses that operators will be able to choose on the basis of their business
decisions and economic cost-effectiveness, and it is not HT who will assess whether
alternative operators will have interest or need in accessing the local loop in this manner
considering that there are other, more affordable types of network access. When imposing
regulatory obligations the Agency must make sure that they are justified and proportionate.
Taking into account what was mentioned and the fact that, if no operator requests this service,
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HT will not incur any costs. In conclusion, the Agency finds it justified to guide the market to
develop in the direction defined in this document.
Details on regulation of optical access network
The Agency replies to a part of HT’s comment Details on regulation of optical access
network, on pages 73 to 78 of the comments on the market of Wholesale Physical Network
Infrastructure Access.
The Agency agrees that optical access network is necessary for further development of
electronic communications services but it is also necessary to create such market conditions
that will not lead to distortion or hindering of competition in the electronic communications
sector.
The Agency agrees with HT’s standpoint that demand for greater access speed will increase in
the future, and such access speed will not be achievable with copper-based technologies
currently used by HT but it also stresses that the introduction of VDSL technology and the
application of dynamic spectrum management may significantly improve the performance of
the existing copper network, which will co-exist with the introduction of the optical access
network for a longer period of time. Furthermore, the chart on p. 75 of HT’s comments
recognises the Agency’s ideas, and presents a logical evolution of technologies. It is
unrealistic to expect that the existing copper infrastructure will be replaced by optical
infrastructure up to the end users in a short period of time, which, naturally, means that
parallel systems will continue to co-exist for some time.
HT stresses that optical access network still has not been rolled out at this moment and the
traditional copper access network is still being used both on the retail and on the wholesale
markets, which is why the optical access network does not represent a bottleneck facility, that
is, access to this network may not be imposed by a regulatory obligation at this moment.
In reply, the Agency stresses that it is trying to anticipate market development and, despite the
fact that optical access network currently does not represent a bottleneck facility because it is
still not rolled out to such extent as the copper access network, the Agency wishes to prevent
the occurrence of a bottleneck facility on the basis of HT’s business plans and anticipated
market development and thus avoid the occurrence of competition problems on the market of
wholesale (physical) network infrastructure access in the future, without regulation.
Furthermore, HT makes a unclear comment when it states that an operator may replicate the
entire HT’s retail offer by using wholesale services based on copper network for which
regulatory obligations already exist (access to the unbundled local loop, bitstream), regardless
of the fact whether HT provides services to end users over copper or fibre network, when
there is no adequate wholesale service over fibre network. It is well-known that services
provided over fibre network will be of better quality, more reliable and significantly faster,
and operators will not be able to adequately compete with HT on the basis of existing
wholesale offers, which may lead to the re-establishment of monopoly. In this situation, HT
would be able to offer the transmission of mutichannel HDTV, video on demand,
videoconferences and voice over the Internet protocol (VoIP) and other broadband services of
adequate quality, while other operators would not be able to provide equivalent services of
equivalent quality over copper infrastructure. This would lead to the strengthening of HT’s
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market position at the retail level of broadband Internet access service and result in the
withdrawal of other operators from the market and in the re-establishment of HT’s monopoly.
HT expects that the Agency will pay attention to the division of risk between HT and users of
wholesale offers of access to optical network which includes the setting of cost-oriented
prices of wholesale services with a reasonable rate of return on investment regardless of
prices of retail services based on this network. Therefore, HT stresses that potential
regulation of wholesale services over optical cables should reflect the following principles in
price calculation: cost-plus, risk sharing and value based pricing.
The Agency insists that it did not define the price of method of calculating wholesale access
over optical network but it left HT the possibility to set prices that will then be analysed by
the Agency taking into account the proposed calculation and pricing principles.
Concerning HT’s proposal that public consultation on optical network should start only in
2010, by accepting this proposal the Agency would ensure to HT the first mover advantage
thus restricting competition in the electronic communication sector and causing irreparable
negative effects on the market since, according to HT’s announcements, HT will introduce
Internet based on optical network into 50,000 households by the end of 200991
. In this
manner, HT actually proposes a “regulatory break” in relation to optical network, while, on
the other hand, it is a well-known fact that the European Commission initiated misdemeanour
proceedings against Germany92
because of amendments of the German telecommunication
slaw which, according to the European Commission, provides for a “regulatory break” in
relation to the replacement of a part of copper infrastructure with optical infrastructure and
implementation of VDSL by Deutsche Telekom.
Therefore, the Agency has an important goal to prevent HT from abusing the first mover
advantage and thus to prevent distortion or hindering of competition in the electronic
communications sector and to ensure to users of the service the possibility to choose services
on the basis of price and quality. Without a timely and effective reaction of the regulatory the
implementation of new access networks may significantly endanger the already limited level
of competition in the access network.
In relation to HT’s comment on the proposal of the obligation according to which HT would
not allowed to offer at the retail level services based on FttX concept, i.e. unbundled access to
the local sub-loop and unbundled access to the fibre-based local loop by means of point-to-
point link, before offering them at the wholesale level because in this results in indirect
regulation of the retail market of services based on the FttX concept, the Agency gives the
following reply:
The Agency thinks that the imposition of this obligation does not result in the imposition of
regulatory obligations on the retail market but allows HT to provide to other operators, on the
basis of wholesale offers, services equivalent to those provided for self-supply, that is, to its
retail arm and to its affiliate companies, in accordance with the obligation of non-
discrimination imposed by the Agency on HT: In other words, other operators have the
possibility to offer to end users on the retail market which is not subject to regulation services
of equivalent quality at the same time as HT. Otherwise, HT would be able to abuse a
91
Lider, 24.04.2009. 92
Cullen International; Flash Message 73/2007; June 28, 2007
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significant first mover advantage which would prevent other operators from acquiring a
sufficient user base to stimulate them to replicate HT’s network, and to make profit at the
same time, and this might, in turn, lead to the re-establishment of monopoly. This could
happen because HT has a large user database and a considerable financial strength, including
the ability to invest into marketing. Furthermore, since contracts with end uses are concluded
for a period of 24 months, this allows HT to collect a significant database of users of
broadband Internet access over optical fibre leaving other operators with a meagre chance for
an economically cost-effective replication of HT’s network.
Therefore, an important Agency’s objective is to prevent HT from abusing the first mover
advantage and thus prevent the distortion or hindering of competition in the field of electronic
communications and allow to end users the choice of type, price and quality of service.
Without a timely and efficient reaction by the regulatory authority the implementation of new
generation access networks may significantly threaten the already limited competition in the
access network. By efficient regulation at wholesale level, the Agency wants to ensure
competition at the retail level.
Consequently, the Agency feels that, in accordance with the obligation of non-discrimination,
HT, as the incumbent, an operator with significant market power and a vertically integrated
operator, has to show in a transparent manner, that is, publicly announce, that it is switching
to a new generation network (NGA).
Furthermore, HT stresses that this obligation would also result in the blockage of HT’s
business for an unspecified period of time because this kind of regulatory obligation would
restrict HT from providing advanced retail services for as long as there is no demand for such
an offer at wholesale level, that is, the provision of services at the retail level would be
conditioned by the degree of technical development of beneficiaries.
.
The Agency finds this claim unjustified because HT may start offering services based on FttX
concept at the retail level after having prepared an adequate wholesale offer based on the FttX
concept under conditions equivalent to those offered for its won retail services at a reasonable
price. This will prevent the abuse of the first mover advantage of HT and the distortion of
competition.
However, since regulatory obligations must be proportionate and justified, the Agency thinks
that the above-mentioned obligation must be imposed on HT on the wholesale broadband
access market by obliging it to provide bitstream access service at IP level based on FttX
concept and not the corresponding wholesale service on this relevant market as it was
originally proposed. HT must offer the corresponding wholesale services on this relevant
market, that is, unbundled access to the local sub-loop and to the fibre-based local loop by
means of point-to-point link upon a reasonable request.
Additional comments on other issues concerning the obligation of access to, and use of,
specific network facilities
HT thinks that the obligation to ensure the collocation and other forms of sharing of electronic
communications infrastructure and associated facilities is superfluous because this is a legal
obligation binding on all infrastructure operators in the territory of the Republic of Croatia
and that this obligation does not have to be emphasised in relation to the operator with
significant market power.
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HT makes an unfounded claim about the “unnecessary stressing”, that is, imposition on the
SMP operator of the obligation to “ensure collocation and other forms of sharing of
electronic communications infrastructure and associated facilities”. Article 30, paragraph 2
of the ECA prescribes the obligation of infrastructure operators to allow to the beneficiary
operator, for a fee and on the basis of a concluded contract, access to and sharing of its
electronic communications infrastructure and associated facilities provided that the relevant
conditions for access and sharing laid down in the Ordinance on the manner and conditions of
access to and sharing of electronic communications infrastructure and associated facilities
(OG 154/08). Consequently, and considering the existing situation in terms of sharing of
electronic communications infrastructure and associated facilities, the Agency finds it
justified to impose the obligation in question on HT as the SMP operator since the imposition
of such an obligation enables the realisation of regulatory principles and objectives of the
Agency. The Agency thinks that this obligation should make a constituent part of regulatory
obligations resulting from this market analysis. The above-mentioned obligation is aimed at
ensuring beneficiaries access to distribution channels and collocation services, and the
transparency of all obligations on the relevant market.
Furthermore, HT thinks that the Agency’s proposal “concerning the imposition of the
obligation not to withdraw the already granted access to the local loop” is not clear. HT
thinks that this obligation may refer only to the existing unbundled access to the local loop
because any other interpretation might have negative consequences in the sense of limiting the
interests of HT’s end users bearing in mind the development of technologies and the need for
modernisation of the existing network. HT thinks that this obligation may not influence HT’s
right to replace the existing copper infrastructure with optical infrastructure, that is, that it
may not be interpreted as the obligation for HT to permanently keep and maintain two parallel
network systems – one based on copper and the other one on optics. HT stresses that
migration will be necessary and that every operator, even operators using the network, will
have to, in case of migration, bear all costs resulting from such migration.
As a result, the Agency gives the following reply:
New operators have already invested funds to connect the end users via the already granted
unbundled access to the local loop and the withdrawal of the already granted access would
result in the loss of the operators’ market share and their withdrawal from the market. This
would be at the detriment of end users since they would be forced to find a new operator.
Therefore, the Agency finds it necessary to the Agency thinks that the already granted access
must be ensured or a corresponding substitute access in order to preserve the continuity of
provision of services by the operator and the possibility of the operator to compete on the
market and in the NGA context, that is, regardless of the changes in the existing network
infrastructure and access technologies towards the end user, except if operators agree upon a
certain form of migration..
In case of lack of agreement between operators, HT must notify the operators and the Agency
at least five years in advance the intention to completely remove the existing network so that
they could have enough time to plan alternative access to the end user
For that reason the Agency incorporates the following text in Chapter 7.1.1. Obligation of
access to, and use of, specific network facilities: „HT may not withdraw the already granted
access unless the operators agree on some form of migration. Lacking agreement between
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operators, HT must notify the user-operators at least five years in advance of the complete
termination f the existing access network in order to give them enough time to plan an
alternative access to end users. This is necessary in order to maintain continuity in the
provision of service of an operator and the possibility for the operator to continue competing
in the market and in the NGA context.”
Furthermore, considering the obligation to grant access to operational support systems or
similar HT’s software systems, HT finds this obligations not only unclear but also not based
on the nature of the nature of the identified market problem on the concrete market the result
of which is that these obligations are not proportionate or justified in relation to regulatory
objectives that want to be achieved.
In relation to this comment, the Agency refers to explanations given in the part of the answers
to comments concerning the obligation to grant access to operational support systems and
similar software necessary to ensure fair competition in the provision of services on p.112 of
this document.
HT thinks that the increase of the monthly fee in case of delay with the delivery of the local
loop is inappropriate and unjustified, and it claims that the Agency completely ignores the fact
that it must, when imposing regulatory obligations and additionally requirements, take into
account that the obligations and additional requirements are proportionate and justified
considering the objectives that want to be achieved. HT states that an additional increase in
the percentage of the monthly fee paid by HT per a day of delay with the provision of service
is not justified because the Agency did not take into account the fact that a part of
responsibility for the delay in the provision of the service lies with the beneficiary as well.
.
When imposing regulatory obligations the Agency paid special attention to proportionality
and justification of obligations and additional requirements considering the objective that
wants to be achieved. In the current HT’s RIO for the service of unbundled access to the local
loop HT has prescribed obligations towards operators, such as the deliver of services of
collocation/extension of collocation, deliver of access to the unbundled local loop, repair of
malfunctions, and certain fees in case of violation of these obligations (non-compliance with
the set time limits). By delaying with the fulfilment of obligations referred to in Article 56,
paragraph 2 of the ECA, as the Agency already stated in its document, HT might restrict the
entry of new operators on the market and influence the business operators of the existing
operators because they depend on HT’s behaviour for the provision of their services, or it
might act in favour of its affiliated company.
Thus, in case of delay with the fulfilment of obligations, end users of beneficiary operators
would suffer and lose confidence in the quality of service of competitors, to their detriment
and for the benefit of HT. The disturbance of operators by not complying with obligations
within a certain time limit might be achieved by delayed realisation of unbundled access to
the local loop or provision of collocation services, and by delayed repair of malfunctions. The
Agency, therefore, thinks that this obligation will ensure compliance with prescribed HT’s
obligations within the set time limits and prevent HT’s possible behaviour as described in
Chapter 6.4.2.2 of this document.
It must also be emphasised that the payment of a delinquency fee also depends on the
behaviour or activities of HT. If HT will timely fulfil its obligations, it will not have to pay
any, not even increased fee, and therefore it is unnecessary to find unjustified the increase of
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fees in case of non-compliance with the defined time limits. On the other hand, if the
responsibility for the delay lies with the beneficiary, HT is entitled by law to initiate disputes
before the regulatory in compliance with Article 20 of the ECA to protect its rights and
interests.
As a result, the Agency found it necessary to increase penalties in case of delay with the
deliver of an individual local loop to ensure that HT complies with prescribed time limits and
to enable operators to provide services to end users on time. It must be emphasised that, in
case of delay with the deliver of an individual local loop, the beneficiary operator, in addition
to actual damage, also has the damage of lost profits since continuous delays with the delivery
of individual local loops destroy the operator’s credibility.
Concerning the possible obligation to notify the Agency on all better conditions of SLA
(advanced SLA) that are possibly provided by HT to other operators on the basis of
commercial agreements, HT thinks that the imposition of such obligation is not justified or
legally founded. HT does not understand on the basis of which authority the Agency reserves
the right to control SLA conditions provided by HT on the basis of commercial agreements
which are subject to open competition since regulation by the Agency is possible only in the
absence of adequate competition on the concrete relevant market.
The Agency finds it justified to impose on HT the obligation to notify the Agency on all better
conditions of SLA (advanced SLA) provided by HT to other operators on the basis of
commercial agreements and stresses that this obligation is in compliance with the obligation
of non-discrimination. In this manner the Agency wishes to establish whether HT has ensured
equivalent conditions in equivalent circumstances to other undertakings providing equivalent
services, or, in other words, whether HT provides, in case of advanced SLA, such a level of
SLA to one operator for a certain price and to another operator for that same price. Therefore,
in order to prevent HT from ensuring better conditions of SLA to different operators at
different prices, in particular to its affiliated company, the Agency thinks it is justified and
legally founded, in accordance with the obligation of non-discrimination, to impose on HT the
above-mentioned obligation. However, the Agency thinks that it must be emphasised in the
text of the analysis that these obligation is imposed in accordance with the obligation of non-
discrimination which has already been imposed on HT and this document will be amended
accordingly.
7.1.2. Obligation of non-discrimination
HT finds that the proposed obligation to notify operators of all planned changes on the
network, that is, of all network modernisation designs by submitting all information in
equivalent time and of equivalent quality as those provided by HT it its retail arm and
affiliated companies is not based on the nature of a possibly identified problem on the relevant
market. HT stresses that it treats all operators in the relevant market in the same manner, and
this has been ensured by reference offers for individual services. Considering the availability
of all information, HT draws the Agency’s attention to the fact that operators now have, via
web interfaces, access to reports on the status of their requests and can easily find out, at any
time, whether their request is being process or whether it has been denied or accepted.
The Agency finds it necessary to oblige HT to notify all planned changes in the network so
that operators beneficiaries of the service of unbundled access to the local loop would be able
to timely react and adjust to the these changes that occurred, which allows them to timely
react at the retail level as well. Therefore, the Agency thinks that HT must be obliged to
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notify operators on planned changes in certain parts of the network (except in case of
complete termination of the existing access network and switching to a new NGA network for
which a longer deadline has been defined earlier in the text) at least one year before starting to
implement these changes and that it must offer the corresponding wholesale service which
ensures sustainable competition to preserve the continuity in the provision of the operator’s
service and the possibility of the operator to continue competing in the market. The non-
provision of the above-mentioned information creates a real threat that HT might abuse the
first mover advantage and put its own retail arm and affiliated companies in a more
favourable position at the retail level compared to its existing and potential rivals, which
would result in the strengthening of HT’s market position and it would have a negative effect
on the efficiency of competition at the retail level.
investments into new generation networks result in the opening of new points of access and
closing of the existing ones, and the Agency thinks that HT might, without regulation,
withhold detailed and timely information on planned changes in the network from its existing
and potential competitors, which would have a negative impact on business plans and
investments of these operators because they would not be able to estimate the impact of such
changes on time and consider different possibilities of investing into their own network or
timely react at the retail level, to the detriment of end users..
The plans for the modernisation of the access network of the infrastructure operator such as:
opening of new access nodes, the rerouting of a part of the network to a new access node and
the similar must be carried out without threatening the existing services provided by
beneficiaries to their users i.e. the principles of spectrum compatibility in the access network
must be completely respected.
7.1.3. Obligation of transparency
HT finds that the proposed obligation to submit to the Agency detailed reports with all
relevant performance indicators and the obligation to grant to the Agency and other operators
access to the system/database used for calculating and archiving main performance indicators:
„is not founded on the nature of the identified market problem, and that it is not proportionate
or justified“. HT stresses that the above-mentioned Agency’s proposal exceeds legal
framework relating to the obligation of transparency and the scope of its competence. HT
states that the Agency proposes the obligation of delivery of the so-called performance
indicators and key performance indicators (KPI) without defining them or giving any other
explanation as to what data they should contain. The Agency also completely ignores the fact
that regulatory obligations must be proportionate and justified. Therefore, HT insists that it is
not acceptable to justify the imposition of such an obligation by claiming that it will have a
positive effect on HT’s business operations as well. Furthermore, the Agency proposes to HT
to deliver the so-called performance indicators and key performance indicators although
Article 59, paragraph 1 of ECA does not provide for such a regulatory obligation.
Furthermore, HT states that operators may create their own bases and monitor KPIs from the
basic report. It is, therefore, unacceptable to transfer this obligation on HT because it requires
additional human resources, time and money. In conclusion, the creation of new reports
means the definition of new processes and IT solutions the implementation of which last at
least 3-6 months which means that this obligation is neither justified nor proportionate to the
objective of regulation. HT also disagrees with the Agency’s proposal that HT must allow
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operators access to systems used for calculating and archiving of data because this means
allowing access to HT’s operational systems. HT stresses that the reason for publishing
reports on HT’s website is unclear, or, more precisely, its purpose and objective are not clear.
Further to this comment the Agency states the following:
Pursuant to Article 58 of the ECA which imposes the obligation of transparency, the Agency
may, in accordance with the provisions of Article 56 of the ECA, impose on operators the
obligation for transparency in relation to interconnection and/or access requiring that certain
information is made publicly accessible, in particular:
• accounting information;
• technical specifications;
• network characteristics;
• terms and conditions for supply and use;
• prices.
This means that the Agency may determine which data must be made publicly available by
HT as the SMP operator. These data may, in particular, be data referred to in Article 58,
paragraph 1 of the ECA. In other words, in addition to data listed in the above-mentioned
provision of ECA; the Agency may define other data (clearly indicated by the phrase “certain
information”) which have to be made publicly available. Therefore, HT makes a wrong
interpretation that the Agency may impose on operators the obligation to make public only
data such as accounting information, technical specifications, network characteristics, terms
and conditions for supply and use and prices.
Forward to HT’s claims that the Agency does not clearly define or give any other explanation
what data key performance indicators should contain, the Agency refers to page 79 of this
document where it is clearly stated what should be contained by the KPI report.
Furthermore, in accordance with the ERG document Best practices on regulatory regimes, the
quality of service associated with wholesale access products is the key operational issue
because it has a direct impact on the service provided to the end user. The SMP operator may
use QoS parameters to provide more quality services for self-supply which may influence
competition at the retail level. Therefore, there must be a control system that will guarantee to
new operators that HT supplies them with wholesale services of equivalent quality to those
provided for its own needs. By discriminating the quality of wholesale service the operator
with significant market power has a direct influence on the quality of service provided to the
end user. Since the user is particularly sensitive to the quality of service, this might lead to
dissatisfaction and loss of confidence of end users into the operator offering the service.
Furthermore, the quality of service is an important factor when it comes to optimisation and
rationalisation of operators’ costs.
The Agency thinks that HT, as the SMP operator on the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location
and a vertically integrated operator, might, without regulation, deny important information to
operators using or intending to use the wholesale service of unbundled access to the local loop
by not providing them with equally detailed information as those provided to its retail arm or
affiliated companies and/or by not providing the necessary information on time to allow the
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beneficiary operator of the wholesale service to react on a downstream retail market and
compete with its retail arm or affiliated companies disposing of the necessary information.
Furthermore, investments into new generation networks result in the opening of new points of
access and the Agency thinks that HT might, without regulation, withhold detailed and timely
information on planned changes in the network from its existing and potential competitors,
which would have a negative impact on business plans and investments of these operators
because they would not be able to estimate the impact of such changes on time and consider
different possibilities of investing into their own network or timely react at the retail level. In
this manner, HT could abuse the first mover advantage and place its own retail arm and
affiliated companies into a more favourable position at the related retail market than the
existing and potential competitions. In other words, it might leverage its market power to the
downstream retail market.
For that reason the Agency imposed on HT the obligation to deliver detailed reports with all
relevant performance indicators in order to ensure the implementation of the obligation of
non-discrimination. KPI parameters should be publicly available on HT’s official website in
order to ensure an optimum level of transparency and confidence of operators into the
effectiveness of the obligation of non-discrimination. This also allows operators to
communicate with their own users in a transparent way.
By allowing operators to access KPI data related to their activities via a web interface, the
Agency had in mind an identical solution to the one already applied in practice by means of
an IT solution for operator using the service of unbundled access to the local loop. Therefore,
the Agency disagrees with HT’s claims that it actually requests access to HT’s operational
systems because it requests access to the already prepared report from the existing HT’s
systems with all relevant KPI indicators which does not endanger the confidentiality of HT’s
operational systems.
a) Unbundled access to copper-based local loop
HT thinks that the time limit for the publication of the reference offer for unbundled access to
the local loop and related facilities of 30 days from the entry into force of the decision
referred to in Article 56, paragraph 2 of the ECA too short because the Agency wishes to
include new technologies into the Reference Offer. HT stresses that the mere introduction of
changes into the existing HT’s RIO requires the minimum of 60 days.
The Agency insists that HT makes a wrong conclusion when it states that the deadline is too
short since the Agency wishes to include new technologies into the reference offer for
unbundled access to the local loop and related facilities since the Agency clearly specified for
each of the new technologies, that is, types of access, the time limit, starting from the receipt
of a reasonable request, for the definition of terms and conditions, time limits and prices of
the service based on each individual access in the reference offer for unbundled access to the
local loop and related facilities.
Furthermore, since HT already has RIO for the service of unbundled access to the local loop,
based on the obligations from the Telecommunications Act, the Agency agrees with HT
proposal of a minimum of 60 days for the introduction of changes into the existing Reference
Offer, taking into account the amount of changes arising from this document and the fact that
the text and content of the reference offer for unbundled access to the local loop must be
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harmonised with regulatory obligations imposed in this document, and with the Ordinance on
reference offers. Therefore, the Agency thinks that 1 October 2009 is a sufficient time limit
for the publication of the reference offer for unbundled access to the local loop and related
facilities, which will include terms and conditions, time limits and prices of the service of
unbundled access to the copper-based local loop.
b) Unbundled access to the copper-based local sub-loop
HT disagrees with the proposed obligation to, within 90 days from the receipt of a reasonable
request for the service of unbundled access to the copper-based local sub-loop, specify terms
and conditions, time limits and prices of the service of unbundled access to the local sub-loop
sin the reference offer for unbundled access to the local loop and related facilities since HT
does not offer the service of unbundled access to the local sub-loop in its network. Therefore,
HT insists, it is not clear what would be the basis of this obligation because every regulatory
obligations must be based on the nature of the identified market problem.
Concerning the above-mentioned comment, the Agency refers to explanations given in the
part of answers to the comments concerning VDSL access over twisted-pair copper wire on
p.99 of this document.
c) Unbundled access to the fibre-based local sub-loop by means of a point-to-point link
HT disagrees with the proposed obligation to, within 90 days from the receipt of a reasonable
request for the service of unbundled access to the fibre-based local loop by means of a point-
to-point link, specify terms and conditions, time limits and prices of the service of unbundled
access to the fibre-based local loop by means of a point-to-point link in the reference offer for
unbundled access to the local loop and related facilities. HT thinks that this obligation is not
based on the nature of the identified market problem and it is therefore neither justified nor
proportionate in relation to regulatory objectives that want to be achieved. HT insists that the
Agency did not take into account necessary HT’s investments when imposing this obligation,
particularly investments into the emerging market and the possibility of a reasonable rate of
return on investments.
Also, HT stresses that the Agency did not take into account the fact that there are no examples
of regulation of unbundling of optical loop in the European practice. The Agency also failed
to take into account the fact that alternative operators have already run at least 7000 km of
optical cables meaning that they already have physical access to the end user and the
unbundling of the fibre-based loop is unnecessary.
In relation to this comment, the Agency refers to explanations given in the part of the answers
to HT’s comments Details on regulation of optical access network on p. 115 of this
document.
Furthermore, HT thinks that the obligation proposed by the Agency as part of the obligation
of transparency concerning the delivery, that is, the availability certain information and data,
referred to on p. 77 of this document, is not based on the nature of the identified problem. HT
stresses that it does not understand the concept of termination pairs and pairs termination
only on MDF and it, therefore, does not understand what this obligation refers to.
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Concerning the above-mentioned HT’s comment, the number of active pairs is the total
number of pairs occupied by certain equipment and serving to provide the adequate user
services. The number of active pairs is, according to data collected in the questionnaire for the
market of wholesale (physical) network infrastructure access at a fixed location, amounted to
a bit over 1,700,000 at the end of the first half of 2008.
The number of termination pairs is the number of active pairs increased by the number of
available pairs, where it must be emphasised that pairs terminate on both sides, that is, on one
side on MDF and on the other on the distribution point in the vicinity of the user. Here it must
be emphasised that every available pair may become active with minimal investments (most
frequently it requires only the construction of the installation segment of the network). The
number of termination pairs in the Republic of Croatia amounts to around 3,600,000. This
number of pairs (with, possibly, a correction factor of 0.8), should be relevant when
calculating the percentage usage of the existing access network for broadband Internet access.
The collecting of data on the number of active pairs in the manner done by HT is not adequate
because it create an unrealistic and incorrect image of the saturation of the existing access
network , which, consequently, prevents the entry of new operators on the market.
The number of pair terminated only on MDF is the total number of pairs terminating on MDF
but they do not have to necessarily terminate on distribution points in the vicinity of end
users. This number, compared to the number of termination pairs takes into account reserves
in the underground network, which do not terminate on the side of users. These reserves may
become active with more investments that the ones in case of available pairs. The number of
pairs terminated only on MDF in the Republic of Croatia is much bigger than the number of
terminated pairs.
Furthermore, HT points out that it has been providing data on the number of active pairs for
years which means that this clearly does not represent a market problem that the obligation is
trying to fix. HT also currently delivers data on secondary equipment and provides on line
access to these data. Data on geographical coverage are delivered in the form of a street list,
and the planned network changes are delivered 6 months in advance. HT insists that it is clear
from the above the imposition of the above-mentioned obligations is neither justified not
proportionate to the regulation that wants to be achieved.
Although HT is obliged by the existing HT’s RIO for the service of unbundled access to the
local loop to deliver the above-mentioned data, the Agency thinks that this is necessary to
ensure that these obligations are fulfilled in a reasonable and fair manner and to prevent
possible lack of security as a consequence of non-imposition of this obligation. We also think
that this obligation does not represent an additional cost for HT because HT has been
providing other operators access to these data for years.
7.1.4. Price control and cost accounting obligation
d) Unbundled access to the fibre-based local sub-loop by means of a point-to-point link
HT thinks that the price control and cost accounting obligation proposed by the Agency on
page 87 in relation to unbundled access to the fibre-based local loop by means of a point-to-
point link is not proportionate and justified considering regulatory principles that want to be
achieved by the regulation of this relevant market. HT stresses that „a relatively small number
of unbundled fibre-based local loops by means of a point-to-point link, mostly for corporate
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users, a very wide optical network rolled out by beneficiaries, and open access to the existing
electronic communications infrastructure lead to the conclusion that there are no obstacles
for beneficiaries to realise the services for corporate users over their own optical
infrastructure “. Therefore, HT states that the imposition of the obligation of unbundling of
the fibre loop by means of point-to-point link is not even necessary. Concerning the obligation
to maintain prices at such levels allowing the provision of the same service to other operators
without incurring losses, HT points out that the price must contain, in addition to the cost, the
division of risk which accompanies investments into new networks since this is an emerging
market and it is, therefore, necessary to ensure a reasonable rate of return on the invested
capital.
The Agency thinks that the wholesale price for the service of unbundled access to the local
loop must, in addition to costs, contain a reasonable rate of return on investments93
.
e) Collocation services
HT disagrees with the proposed obligation related to collocation services according to which
HT has to charge all prices related to collocation services in accordance with the regulatory
obligations of transparency, non-discrimination and cost orientation, in which case prices
have to be based on actual costs of provided services including a reasonable rate of return on
investments. HT also disagrees with the Agency’s proposal that the division of costs of
preparation of collocation premises and putting them at disposal remains the same as defined
in the Reference Offer for the service of unbundled access to the local loop. HT thinks that
this obligation is illegal because neither the previous law nor the currently valid ECA provide
for the possibility of regulation of the provision of collocation services as proposed by the
Agency and as currently resolved in the valid Reference Offer.
The Agency insists that the collocation service is important for the unbundling of the local
loop and as such must be regulated by the Agency in order to prevent the possibility of
leveraging HT’s significant market power from the relevant market covered by this document
to the downstream retail market by charging unjustified and unfounded costs of services.
The Agency proposed that the division of costs of preparation of collocation premises and
putting them at disposal remains the same as defined in the Reference Offer for the service of
unbundled access to the local loop (since the first Reference Offer from 2005) because the
changing of the above-mentioned obligation could only contribute to the increase of
regulatory unpredictability and insecurity since it already exists in practice. The Agency also
thinks that this is the best way to solve problems related to the division of costs of preparation
of collocation premises and putting them at disposal.
7.1.5. Obligation of accounting separation
Further to HT’s comment concerning the obligation of accounting separation, the Agency
gave the following reply.
The Council of the Croatian Agency for Telecommunications (predecessor of the Agency
pursuant to Article 131 of ECA) adopted a decision on 17 December 2007 (Class: 344-01/07-
93
The Agency thinks that the reasonable rate of return on invesetments does not have to be the same in all cases
but it will depend on whether new ducsts had to be built or optical fibre were run out through the existing ducts.
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01/939; Reg.No: 376-11-1) announcing „A list of relevant markets and operators and
providers of telecommunications services with significant market power in these relevant
markets “ according to which HT is an operator with significant market power on the relevant
market of fixed public telephone networks services, on the interconnection market and on the
market of leased telecommunications lines. By designating a SMP operator, the lawmaker
must by force of law impose on HT in Article 57 of Telecommunications Act the obligation
of accounting separation and authorises the Agency’s Council to adopt a decision on the
manner of separation of business activities of the operator with significant market power in
terms of their organisation, accounting and other details related to the separation.
This means that HT incorrectly claims that the „obligation of accounting separation was
already imposed on HT by the decision of the Agency’s Council (Class: 130-01/06-01/09,
Reg.No: 376-11-18) of 18 November 2008 before carrying out market analysis procedure
which obviously is not an example of the best regulatory practice.“ since the Agency’s
Council adopted this decision to prescribe the manner of implementation of the above-
mentioned obligation while the obligation itself was imposed by force of law, ex lege, that is,
it follows from the provisions of the Telecommunications Act.
In relation to your claims concerning the public consultation on „Accounting separation and
cost accounting“, we would like to stress that this public consultation was held in order to
decide on the manner of implementation of accounting separation and cost accounting and the
goal of the market analysis procedure was to establish whether certain regulatory obligations,
including the accounting separation obligation, need to be changed, kept or withdrawn.
Taking this into account, and since it published the replies to all of the comments received
during public consultation on its website, the Agency deems it unnecessary to repeat the
comments.
.
The request not to apply the obligation of accounting separation to the market of wholesale
(physical) network infrastructure access at a fixed location which is elaborated only by
comparing it to the Agency’s conclusion given in the Analysis of the Market of Termination
of Calls in a Certain Public Mobile Communications is considered by the Agency as
insufficient because it does not prove why this obligation is not necessary. Every relevant
market has its peculiarities which the Agency recognised in the analysis procedure and
elaborated in detail. Then, on the basis of identified competition problems that might occur in
the absence of regulation in the time period covered by the analysis, it proposed the
corresponding regulatory obligations.
The Agency thinks that it is unfounded to base conclusions on the need to introduce a certain
regulatory obligation exclusively on final results of an analysis without taking into account
market peculiarities that caused them. The identified competition problems related to vertical
leveraging of significant market power on the market of voice call termination on individual
mobile networks are not equivalent to problems identified in the wholesale (physical) network
infrastructure access at a fixed location and, for that reason, the Agency proposed different
regulatory obligations.
The Agency also thinks that the regulatory obligation of accounting separation will resolve
the problem of cross-subsidising and ensure the implementation of obligation of non-
discrimination and transparency confirmed in the adopted ERG Opinion, which was published
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in the document „Guidelines for implementing the Commission Recommendation C (2005)
3480 on Accounting Separation & Cost Accounting Systems under the regulatory framework
for electronic communications“. The Agency thinks that the analysis clearly shows the
advantages from implementing the obligation in question and the possible damage for the
development of competition that would result from the withdrawal of this obligation.
In conclusion the Agency finds it necessary to stress that the accounting separation method
applied by the Agency is in accordance with European regulatory practice and doe not see any
logical or justified reason why HT should doubt the credibility of the imposition of this
obligation.
8.2.2 Answers to VIPnet’s comments
Vipnet indicates the link between the market of wholesale (physical) network infrastructure
access at a fixed location and wholesale broadband access market and states that the Agency
concluded that these markets contain the service of ADSL access over twisted-pair copper
wire provided by HT for self-supply and the services of network infrastructure access over
twisted-pair copper wire provided by HT for self-supply, however, the difference between the
two services is not entirely clear, in other words, it is not clear whether the former services is
already contained in the latter one.
The Agency agrees that there is a link between two relevant markets and, precisely because of
that, and, according to the recommendation from the Explanatory Memorandum to analyse
these two markets together, that is, at the same time, the Agency initiated the analysis of
wholesale broadband access market at the same time as the analysis of the market of
wholesale network infrastructure access (including shared and fully unbundled access) at a
fixed location.
Services on the same retail market are provided on the basis of wholesale services arising
from these two markets, that is, operators beneficiaries of wholesale services which are a part
of these two relevant markets compete in the provision of the service of broadband Internet
access. Considering the coverage of HT’s network, it is necessary to consider the influence of
services provided by HT for self-supply in relation to wholesale services provided on the two
relevant markets in order to establish whether they should be included in the dimension of
these two relevant markets.
On the relevant market of wholesale (physical) network infrastructure access at a fixed
location the corresponding service provided by HT for self-supply is the service of physical
network infrastructure access provided by HT to its end users, that is, for self-supply. It is
therefore necessary to assess the influence of services of physical network infrastructure
access provided by HT to its end users to wholesale services which are a part of the relevant
market of wholesale (physical) network infrastructure access at a fixed location.
On the other hand, on the relevant broadband Internet access market the corresponding
service provided by HT for self-supply is the service of ADSL access over twisted-pair
copper wire provided by HT to its end users, that is, the service of wholesale broadband
access for self-supply, and it is necessary to establish the influence of this service on
wholesale services which are a part of the relevant market of broadband Internet access.
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The Agency established the following on both relevant markets. If, in case of a hypothetical
price increase of wholesale services on these two relevant markets, beneficiary operators
transfer this higher price to the end users, their end users would switch to HT’s service
considering its network coverage. In that case, the dimension of the relevant market includes
HT’s service provided for self-supply, which corresponds to wholesale services on this
relevant market.
Furthermore, Vipnet asked a question related to the service of physical collocation – what
kind of regulatory measures does the Agency plan for cases when operators will no longer be
able to physically achieve collocation in HT domain.
The Agency envisaged regulatory measures that would ensure access to individual end users
and operators who will no longer be able to physically, due to lack of space, collocate, and it
elaborated these measures in detail in the documents on the analysis of the market of
wholesale (physical) network infrastructure access at a fixed location and broadband Internet
access market analysis. The Agency envisaged the following measures in these cases:
- service of distant collocation
- service of unbundled access to the local sub-loop
- bitstream access service.
HT currently ensures for operators the collocation service in order to provide to this operator
unbundled access to certain HT’s local loop at requested locations of HT’s main distribution
frame, including, among others, the service of distant collocation (collocation in premises or
street cabinets installed by the operator or leased on public or private property in the vicinity
of the location of HT’s main distribution frame). This means that, if physical or virtual
collocation requested by the operator is not possible on the location of the main distribution
frame, HT may deny the operator’s request for physical or virtual collocation but must ensure
to the operator the use of distant collocation. .
Furthermore, considering the stagnation, that is, the saturation of the existing available
physical collocations, the Agency enables operators to reach new users by introducing the
service of unbundled access to the local sub-loop (including more quality and faster services
over VDSL technologies), by building street cabinets and shortening of the copper wire,
which represents an upgrading of the copper-based network.
Furthermore, the Agency finds it very important to ensure in the upcoming period such
conditions in the reference offer for wholesale broadband Internet access that will ensure fair
and effective competition since, due to realistic, physical limitations to collocation of
equipment and the decreasing of the operator’s financial strength, an efficient reference offer
for broadband Internet access (bitstream access service at all three levels – DSLAM, Ethernet
and IP regardless of the access network – twisted-pair copper wire, FttH/FttB, FttCab) will
help prevent the distortion and hindering of competition in the electronic communications
sector.
Vipnet thinks that the restriction in the Reference Offer for the service of unbundled access to
the local loop concerning the prohibition of giving of realised unbundled local loops for use to
third parties should be removed, because the removal of this restriction would allow
alternative operators to provide the service of wholesale broadband access in its network to
third parties and thus compete with the wholesale service offered by HT.
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The Agency thinks that there are not objective or technical reasons to prohibit the cession of
the leased pair, and it, therefore, accepts Vipnet’s proposal because the current situation
represents some kind of restriction on disposal of the leased pair by the alternative operator. It
is a fact that Reference Offer for the service of unbundled access to the local loop in Article
1.2 reads: “Services or parts of services which are a subject of this Reference Offer may not
be ceded to third parties before prior T-Com’ consent.” In other words, this reference offer
does not state that the cession of the pair to third parties is not possible due to the existence of
some technical restrictions but the cession is conditioned by HT’s decision (if the operator
gets HT’s consent, it may cede the pair to a third party), and, in this manner, HT has the
discretionary power to decide who will be granted consent.
The Agency finds this condition unnecessary because the relationship between HT and the
operator who conducted the unbundling of the local loop will remain the same. The operator
who unbundled the loop from HT still has to respect all provisions of the relevant reference
offer since this offer regulates only the wholesale relationship between HT and the alternative
operator, and this operator will be held responsible in case of non-compliance with the above-
mentioned provisions and not the third party to which the leased pair has been ceded. It must
be mentioned that the beneficiary of unbundled access to the local loop (lessee) who intents to
cede the pair to a third party (sub-lesee) must include in a contract al possible operational
activities that may arise during provision of such services. In other words, pursuant to the
provision of the Civil Obligations Act, Article 537, subleasing is possible only if it does not
cause damage to HT, that is, the beneficiary (lesee) of unbundled access to the local loop is
still responsible for proper use of the service of unbundled access to the local loop to HT
(lessor). For example, correspondence towards HT must still be carried out by the operator
beneficiary of the unbundled access to the local loop – notification of repair of malfunctions,
payment of the monthly fee. As a continuation of the previously mentioned beneficiary’s
responsibility, the beneficiary must at all times know which access speed is provided by the
sub-lesee over the leased pair (local loop unbundled by the beneficiary) and it must comply
with the provisions defined in the Static Plan for Frequency Spectrum Management and the
accompanying Pair Management Plan (obligation to publish the „ Static Plan for Frequency
Spectrum Management” and the accompanying Pair Management Plan has been defined as
part of the obligation of transparency in Chapter 7.1.3. of this document). Therefore, the
Agency accepts Vipnet’s proposal and will amend the text of the analysis accordingly.
Comment concerning the implementation of measure
Reference offers
Vipnet stresses that it is not completely clear from the document whether measures will enter
into force by the adoption of the Agency’s decision after public consultation or later after the
adoption of a new reference offer.
The Agency stresses that the regulatory obligations imposed on the SMP operators enter into
force with the adoption of the decision referred to in Article 56, paragraph 2 of the ECA.
However, the Agency defined in all documents on the analysis of each relevant market the
time limit for the SMP operator to incorporate certain terms and conditions, time limits and
prices into the corresponding reference offer.
In relation to Vipnet’s comment that the adoption of a new reference offer is a long-lasting
process, the Agency stressed that the process for the amendment of reference offers was
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defined in the TA and was different from the one defined by the ECA. In accordance with the
ECA and the Ordinance on reference offers (OG 37/09), if the Agency, after having
conducted a market analysis procedure, which consists of the identification of relevant
markets and assessment whether there are one or more operators with significant market
power, during which established the lack of effective competition on the relevant market
which is a constituent part of the European Commission Recommendation on relevant
markets, adopts a decision on the designation of the SMP operator on this relevant market, the
Agency may impose on this operator a regulatory obligation of non-discrimination and the
obligation of transparency in relation to interconnection and/or access. The Agency may also
impose on the SMP operator who has been imposed the regulatory obligations of non-
discrimination and transparency, impose the obligation to publish the reference offer which
must contain time limits, terms and conditions and prices of services. The procedure for the
amendment of reference offers will be carried out by the Agency once a year, and,
exceptionally, several times a year. Therefore, the procedure for the amendment has been
defined in the Electronic Communications Act and the Ordinance on reference offers, and the
Agency has described this procedure in detail under the obligation of transparency.
Further to Vipnet’s comment that the reference offer is very comprehensive and non-
transparent and its proposal to summarise the offer to the most impotent details and important
conditions, the Agency gives the following reply.
The Agency thinks that the summarising to the most important details and important
conditions would not contribute to transparency and the implementation of the obligation of
non-discrimination, which is the main purpose of the reference offer. Furthermore, the basic
content of the reference offer, the level of detail, and the manner of its publication have been
prescribed by the Ordinance on reference offers.
Furthermore, considering Vipnet’s comment that public consultation in the process of
adoption of the reference offer might contribute to more effective implementation of
measures, the Agency stresses that operators had the opportunity, during public consultation
about the proposal for decisions referred to in Article 56, paragraph 2 of the ECA, give their
comments on regulatory obligations imposed on the SMP operator , including time emits,
terms and conditions and prices that the SMP operator must incorporate into the reference
offer.
Also, since the procedure for the amendment of reference offers for the purpose of
implementation of regulatory obligations imposed on the SMP operator is carried out by the
Agency, ex officio or upon the operator’s request, once a year, or, exceptionally several times
a year, and since the procedure is completed by a decision of the Agency’s Council, the
Agency shall, in accordance with its legal obligations and pursuant to Article 22, paragraph 1
of the ECA; publish the proposal of the decision of the Agency’s Council concerning the
procedure for the amendment of the reference offer for the purpose of public consultation so
that all interested parties may express their opinion and give comments and proposals.
Regulation on the basis of acquired experience
Vipnet states that more attention should be paid to the identification of remaining problems in
the use of service of wholesale broadband access, to assessing whether former regulatory
measures have yielded expected results, whether there were any disputes between operators
and how where these resolve, and which facts may help find new solutions that will
encourage the development of competitiveness on the retail market of services based on
broadband technologies. Furthermore, Vipnet finds the former model of disputes between
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operators to be inefficient and thinks that operators need to resolve disputes in a more
efficient way, which should not include continuous amendments of reference offers.
The Agency thinks that all problems that have already occurred or that might occur without
regulation on relevant broadband Internet access markets have been explained in detail.
Before imposing regulatory obligations, the Agency must identify competition problems on
the relevant market since the identified competition problems represent an “illness” of the
market, and regulatory obligations represent a “cure” for the identified “illnesses”. The
Agency must ensure that only those regulatory obligations are imposed which are necessary to
deal with identified market problems and it used the principles of proportionality and
justification to impose those regulatory obligations which resolve all problems which already
have occurred or might occur on the market. The Agency thinks that by imposing regulatory
obligations which refer to wholesale broadband markets it found solutions for encouraging
competitions on the retail broadband Internet access market. Furthermore, in relation to more
efficient dispute resolution, the Agency insists that the purpose of a quality reference offer is
faster contract conclusion, prevention of discrimination and more efficient resolution of
possible disputes and the Agency stresses that all operators had the opportunity to give their
proposals and opinions on the proposed decisions referred to in Article 56, paragraph 2 of the
ECA aimed at preparing a quality and transparent offer. The same opportunity will be offered
during the procedure for amendments of the reference offer.
Prices
Concerning the prices of services, Vipnet states that the obligation of cost orientation of prices
for network access and the prohibition of cross subsidising are not explicitly mentioned in
proposals for decisions of the Agency defining regulatory measures.
Further to the above, the Agency mentions that it is clearly prescribed in Article 62 of the
ECA that the Agency may impose on operators obligations relating to cost recovery and price
controls, including obligations for cost-orientation of prices. Therefore, the Agency does not
see any justified reason to include this obligation in the text of the decision because this
Article includes the obligation of cost-orientation of prices in the manner prescribed by the
Agency.
Concerning your comment that the proposals for the Agency’s decisions do not contain the
prohibition of cross subsidising of services, we would like to point out that the Agency
imposed regulatory obligations in the above-mentioned proposals for decisions and not
market problems that need to be resolved by imposing these obligations. Since, pursuant to
Article 60, paragraph 2 of the ECA, unfair cross subsidisation may be prevented by imposing
the obligation of accounting separation, the Agency imposed on HT the obligation of
accounting separation.
Issue of leased lines
Vipnet proposes that the Agency should conduct the analysis of the market of leased lines as
soon as possible so that the dominant operator would establish a unified offer of lines on the
market which would not differentiate the lines by type and which would define the prices of
lines on the basis of cost-orientation.
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The Agency mentions that meetings with fixed network operators were held in the period
between 1 and 3 July 2008 where schedule for market analysis procedures of individual
markets was agreed upon and established. All operators were informed about the Agency’s
plans concerning market analysis procedures for all seven relevant markets from the
Recommendation. Therefore, five (of seven) relevant markets susceptible to ex ante
regulation on which market analysis procedure will start have been defined in a decision of
the Agency’s Council of 7 July 200894
. The remaining two markets, among which the market
of wholesale terminating segments of leased lines, regardless of the technology used to
provide leased capacity, will be subsequently established by an Agency Council’s decision
before the start of market analysis procedure on these markets.
8.2.3 Answers to comments made by H1 Telekom
Answers to comments made by H1 Telekom follow the chapter numbers from the document
that H1 commented on.
4.1.3.1.1 Service of unbundled access to the local sub-loop based on FttCab solution
H1 Telekom points out that the shortening of the twisted copper pair in case of FTTB or
FTTH solution narrows down the market for the beneficiary using HT’s collocation, that is,
on the main distribution frame of the location, by taking a certain number of users down from
the access distribution frame at this collocation to transfer them to a cabinet where HT
installed its new DSLAM or other, which requires additional investments from beneficiaries
who want to have their former users close by.
The Agency stresses that it may not influence operators’ decisions to invest into their own
infrastructure, including by using FttCab concept to be able to provide the service of
broadband Internet access and associated facilities over VDSL technology to those end users
who need greater access speed.
The Agency’s objective is to encourage investments and modernisation of the access network.
Another objective is to ensure that other operators are able to continue providing services on
the basis of the existing wholesale services, at least in the period covered by this analysis, and
to provide to those operators new wholesale services based on FttCab or FttH solution in
order for them to be able to compete with the SMP operator in the provision of broadband
Internet access and convergent services. Therefore, the regulatory obligations proposed by the
Agency area aimed at preventing HT from withdrawing the already granted access and at
forcing it to offer wholesale services equivalent to those used by its own retail arm to provide
broadband Internet access and convergent services. It may, therefore, be concluded that H1
Telekom’s claims that the beneficiary will have to invest into shortening of the loop or loose
the user are unfounded because it is up to the beneficiary to decide whether to invest or
continue providing service from the local exchange (which will still be possible).
Furthermore, considering the Agency’s conclusion that the service of unbundled access to the
local loop based on FttCab solution is a substitute service for the service of unbundled access
to the copper-based local loop, H1 Telekom stresses that services are substitutable at the very
end not on the entire path to the user which must be ensured by the operator.
94
Class: UP/I-344-01/08-01/1582; Reg.No: 376-11-08-01
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The Agency agrees with H1 Telekom’s opinion that the path to the end user in case of
unbundled access to the local sub-loop based on FttCab solution is not the same as in the case
of unbundled access to copper-based local loop, since in the case of unbundled access to the
local loop the beneficiary of the wholesale service in question must collocate its equipment
closer to the end user making the path to the street cabinet longer than the one to the local
exchange.
However, the Agency has, precisely because of this, ensured as part of the obligation of
access to, and use of, specific network facilities, that HT, must ensure the sharing of ducts at
those locations where it unbundled the local loop for the purpose of self-supply, that is, it
must ensure access through distribution channels to the street cabinet of the operator or some
other concentration point pursuant to Article 30 of the ECA and the Ordinance on the manner
and conditions of access to and sharing of electronic communications infrastructure and
associated facilities95
. Furthermore, if there is no room in the ducts, HT must lease dark fibre
to the operator. If there is no free dark fibre, HT should ensure access based on wavelength
(WWDM access) over fibre used by HT for self-supply in order to connect the beneficiary’s
active equipment to the network.
4.1.3.1.2 Service of unbundled access to the local loop based on FttH solution
Further to H1 Telekom’s comment that the service of unbundled access to the copper-based
local loop and the service of unbundled access to the local loop based on FttH solution are not
substitutable services, that is, that optics substitutes copper but not vice versa, the Agency
gives the following reply:
The Agency has, as it stated on page 25 of the document, used demand-side substitution to
establish substitute services for the currently valid service of wholesale (physical) network
infrastructure access (including shared or fully unbundled access) at a fixed location. In other
words, the Agency was looking for services that beneficiaries might use as substitute services
for the service of unbundled access to copper-based local loop, in the manner that users of this
service, if the incumbent increases the price thereof, build their own access infrastructure or
start using some other wholesale service, which will be regarded by them as an equivalent
service.
Consequently, the Agency used the existing wholesale serviced to establish the dimension of
the relevant market, that is, to extend the dimension of the relevant market depending on
whether the existing wholesale service may be substituted with individual wholesale services
or by rolling out own infrastructure.
Although the wholesale service of unbundled access to the local loop based on FttH solution
currently does not exist, and, taking into account the forward looking principle, the Agency
thinks that, in case of a hypothetical increase of the service of unbundled access to copper-
based local loop, and the start of migration of HT’s end users to services based on new
technical solutions, beneficiaries of this service would be interested in switching this services
with the service of unbundled access to the local loop based on FttH solution because this
service would allow them to provide more quality, faster and innovative services and thus
compete with HT at the retail level.
95
OG 154/2008
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On the other hand, according to H1 Telekom, beneficiaries who would be using the service of
unbundled access to the local loop based on FttH solution would not switch to copper-based
services because of a hypothetical price increase. Therefore, the Agency corrects its incorrect
conclusion that the service of unbundled access to the local loop based on FttH solution and
the service of unbundled access to the copper-based local loop are substitute services by
saying that the service of unbundled access to the local loop based on FttH solution is a
substitute service for the service of unbundled access to the copper-based local loop.
Furthermore, further to the Agency’s conclusion that the service of unbundled access to the
local loop over optical fibre may not be regarded as a substitute service for the service of
unbundled access to copper-based local loop, H1 Telekom stresses that his may be regarded
as correct if the beginning and end of the copper and optical pairs are in the same place. In
that case, the beneficiary has the same status as HT, otherwise, this is not the case.
The Agency thinks that broadband Internet access services over optical fibre will have s
significant influence on competition at the retail level, that is, these services will be
substitutable with the existing services based on ADSL technology because this will satisfy
the need of users for more quality, faster and innovative services. This is because access
networks are being modernised and the existing twisted copper pair is, partially or fully,
replaced by optical fibre in the way that it is being shortened or completely disappears. This
does not mean that the possibility of access disappears in such cases, including the obligation
of access to the end user but only that access is provided over a different technology.
Considering the principle of technological neutrality and the fact that access to the end user is
no longer provided over copper but over optical fibre, it is clear that access over optical fibre
is a substitute service for the service of unbundled access to the local loop over copper.
Therefore, the Agency has conducted the analysis of the market in question, in accordance
with EU recommendations, on the basis of the principle of technological neutrality meaning
that the access to the end user, in case of replacement of twisted copper pair with optical fibre,
remains the same, or, in other words, the end user will still have the service which will be
provided over a new access infrastructure. It may be concluded from all of the above that, due
to technological changes, that is, technological development, and taking into account the
principle of technological neutrality, the Agency includes all physical access infrastructure
providing access to the end user without limiting itself to the twisted copper pair, that is, the
Agency considers the service of unbundled access to the local loop over optical fibre as a
substitute service of the service of unbundled access to the local loop over copper .
4.1.3.2. Bitstream service as a substitute service of the service of unbundled access to the
local loop
H1 Telekom asked what is that an additional burden on the local pair which changes the price
access speed, and states that the pair is identical for all speeds, including the DSLAM
connection, while transferred traffic is charged separately.
First of all, the Agency described in the above-mentioned Article only the currently valid
wholesale broadband Internet access service, which consists of ADSL transport and ADSL
access services. ADSL access speed may be identical or different from HT (depending on the
operator’s decision), but it may never exceed the maximum speed provided by HT within its
retail service of ADSL access.
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Furthermore, the Agency stresses that a single bitstream access service was proposed as part
of regulatory obligations and that HT must offer a single price that will contain both speed
and traffic/data transfer which implies that with more access speed user will use more
capacity in the core network. Furthermore, since the wholesale price of bitstream access
service will be based on the retail minus method and taking into account the fact that HT
charges a higher price for greater access speed to its end users as well, it may be concluded
that the wholesale price for bitstream access service will differ according to different access
speed.
4.1.3.4. Broadband Internet access service for self-supply as a substitute service for the
service of unbundled access to the local loop
H1 Telekom agrees with the Agency’s claim on page 36 of this document that operators, in
order to keep end users in case of a hypothetical price increase, will not increase the price of
the service for the end user to cover the difference in the price of wholesale service, however,
it stresses that operators will not be able to further develop their service and broaden their
offer.
The Agency agrees with H1 Telekom’s opinion that the operator will be prevented from
further developing the service and broadening the offer. However, in this part the Agency
wanted to establish whether operators providing the service for the purpose of self-supply
could create a sort of competitive pressure on HT to prevent HT from increasing the price of
the service of unbundled access to the local loop. The Agency concluded that there is no such
competitive pressure from operators using their own infrastructure.
On one hand, operators using the service of unbundled access to the local loop will not
modify the price charged to end users because of the wholesale price increase in order to keep
those users, but this will place them, according to H1 Telekom, into an unfavourable position.
On the other hand, the Agency thinks that if operators using the service of unbundled access
to the local loop modify the price charged to end users because of the wholesale price
increase, those end users will mostly switch this service with the service provided by HT
since HT may provide the same service to each of these users.
Therefore, the Agency concludes that only network infrastructure access over copper pair
provided by HT for self-supply may be included into the dimension of services and not
service provided by other operators via their own infrastructure. .
Additionally, since H1 Telekom pointed out in the comments on the wholesale broadband
access market that other types of access provided by HT for self-supply to the end user must
be included96
, not only those based on copper pair, the Agency shall take this comment into
account on this market as well.
The Agency agrees that other types of network infrastructure access provided by Ht for self-
supply also need to be taken into account but only those types of access which may be
included into the relevant market dimension. Therefore, the service of network infrastructure
access on the basis of FttCab concept provided by HT for self-supply and the service of
network infrastructure access on the basis of FttH concept provided by HT for self-supply
both need to be taken into account. Although HT did not deliver in questionnaires prepared
96
p. 139 of the document „Analysis of Wholesale Broadband Access Market“
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for the purpose of analysis of this relevant market information that it provides these types of
access to network infrastructure to the end user, the Agency thinks that in this case, as in the
case of wholesale service, the forward looking principle has to be taken into account to
include the above-mentioned types of broadband access provided by HT for self-supply.
Therefore this document needs to be amended accordingly.
6.4.2.1. Discriminatory use or withholding of information
H1 Telekom asked the following question: „how to behave when HT opens a new point of
access at a location of the beneficiary and thus significantly decreases the potential of the
beneficiary’s location and “steals” a significant number of users. The Agency imposed on HT, in accordance with Article 61, paragraph 3, item 3 of the ECA,
the obligation not to withdraw the already granted access to the local loop because the
withdrawal of the already granted access might cause damage and increase of costs of
operators who were using the service of unbundled access to the local loop and to leveraging
of HT’s significant market power to a downstream retail market.
The Agency also obliged HT to provide information on planned changes in the network so
that operators using the service of unbundled access to the local loop might be able to timely
react and adjust to the occurred changes. Therefore, the Agency proposed that HT be
mandated to notify operators of planned network changes at least one year before starting the
implementation of the changes in question The modernisation plans for the access network of
the infrastructure operator such as: the opening of new access nodes, rerouting of parts of the
network to a new access note etc. must be carried out in such a manner that the existing
services provided by operators to their end users are never threatened, that is, the principles of
spectrum compatibility in the access network must always be respected
In case of a complete termination of the existing access network and switching to a new NGA
network, the Agency thinks that the already granted access must be ensured or a
corresponding substitute access in order to preserve the continuity in the provision of services
by the operator and the possibility of the operator to compete on the market and in the NGA
context, that is, regardless of the changes in the existing network infrastructure and access
technologies towards the end user, except if operators agree upon a certain form of migration.
In case of lack of agreement between operators, HT must notify the operators and the Agency
at least five years in advance the intention to completely remove the existing network so that
they could have enough time to plan alternative access to the end user. The Agency has
amended the text of this document accordingly, and imposed on HT the obligation in
question.
7.1.1. Obligation of access to, and use of, specific network facilities
The Agency stated in the document that: „ The location where the operator will install the
street cabinet must comply with technical requirements, and the equipment to be installed in
the mentioned cabinet must completely ensure network integrity, that is, it may not cause the
degradation of services provided from the local exchange.“ In relation to this sentence, H1
Telekom states that the same should apply to HT, that is, that HT should not distort network
integrity when installing a street cabinet.
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The Agency agrees with the above-mentioned comment that HT must, when installing a street
cabinet or any other intervention on the network, preserve network integrity, and the Agency
will incorporate this into the text of the analysis. Furthermore, further to the Agency’s claims that, pursuant to Article 61, paragraph 3, item 3
of the ECA, the Agency finds it necessary to impose on HT the obligation not to withdraw the
already granted access to the local loop, H1 stresses that this is an important obligation in
situations where there already is another operator at some location and Ht is increasing the
number of access points related to this location. The Agency stresses that the purpose of the-above mentioned obligation was precisely to
prevent HT from withdrawing the already granted access considering the investments already
made by the operator.
7.1.3. Obligation of transparency H1 Telekom proposes that HT must specify conditions, time limits and prices of the service of
unbundled access to the fibre-based local loop by means of point-to-point link in the
reference offer for unbundled access to the local loop and related facilities within 90 days
from the completion of market analysis, and not from the receipt of a reasonable request for
the service of unbundled access to copper-based local sub-loop specify conditions, time limits
and prices of the service of unbundled access to the local sub-loop in the reference offer for
unbundled access to the local loop and related facilities. H1 Telekom asks who will decide
whether a certain request is reasonable. In this part, the Agency replies to H1 Telekom’s comments related to the reasonable request.
The Agency stated in its document that SMP operators must assess whether a request is
reasonable in accordance with the proposed obligation of non-discrimination and technical
characteristics of its own network.
This means that, in this case, HT will have to assess whether a request is reasonable or not. If
HT decides that a request is not reasonable, the Agency will, upon the operator’s request, and
in accordance with Article 20 of ECA, decide whether the request is reasonable.
Furthermore, the Agency finds it unjustified to impose on HT the obligation to offer terms
and conditions, deadlines and wholesale prices for certain services before there is a reasonable
request from other operators. This might put HT in an unfavourable position to prepare
wholesale conditions, which incurs additional costs, although there is a possibility that no
operator is interested in the service in question.
Therefore, the Agency will not change its proposal that HT must, within 90 days from the
receipt of a reasonable request, specify conditions, time limits and prices of the service of
unbundled access to the fibre-based local loop by means of a point-to-point link in the
reference offer for unbundled access to the local loop and related facilities...
Concerning H1 Telekom’s comment concerning the meaning of related facilities in the name
of the reference offer for unbundled access to the local loop and related facilities, the Agency
replies that related facilities are defined in the Ordinance on reference offers – facilities
related to the provision of unbundled access to the local loop, in particular, collocation,
electronic communication lines and adequate IT systems access to which must be allowed to
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the beneficiary to provide services on a competitive and equal basis. Since HT must take into
account the provisions of the Ordinance on reference offers when preparing the reference
offer, HT must define the meaning of the related facilities in the reference offer for unbundled
access to the local loop and related facilities. Furthermore, concerning H1 Telekom’s comment that Static Plan must be made publicly
available to all operators, the Agency stresses that precisely the paragraph in relation to which
H1 requests the publication of the Static Plan reads: “The Agency finds it necessary to impose
on HT the obligation to define the Static Plan for Frequency Spectrum Management with the
accompanying Pairs Management Plan in HT’s access network in the reference offer for
unbundled access to the local loop and related facilities.” Consequently, the Static Plan for
Frequency Spectrum Management with the accompanying Pairs Management Plan in HT’s
access network will make a constituent part of the reference offer for unbundled access to the
local loop and related facilities and, as such, it will be publicly available to all operators. Considering H1 Telekom’s comment that it must be made possible that all works related to
the realisation of collocation premises are carried out by the operator and his contractor under
HT’s supervision, the Agency stresses that it proposed this obligation to HT and refers to
Chapter 7.1.1. Obligation of access to, and use of, specific network facilities where t reads:„
For all works on the realisation of collocation premises (installation of cables) for which HT
uses external contractors, HT must allow the operator to choose the contractor (HT’s
contractor or some other contractor) on the basis of its own business decisions. If the
operator employs its own contractors, an HT’s employee will supervise the works.
7.1.4. Price control and cost accounting obligation
Concerning H1 Telekom’s comment that Agency should be imposed an approximate date for
the completion of the project for the definition of cost accounting method (cost model), the
Agency stresses that its obligations related to the electronic communications sector, in
accordance with Article 5, paragraph 1 of the ECA, have been defined in the ECA, and that
the mentioned Article does not prescribe the obligation for the Agency to define the deadline
for the completion of the project in question. However, the Agency stresses that the start of
the project is planned for the last quarter of 2009, and the planned time limit for the
preparation of models and for their application amounts to 18 months since the start of the
project.
a) Fully unbundled access to the copper-based local loop
H1 Telekom stresses that a strong growth trend in the number of unbundled local loops is a
result of the beginning of new entries into this market, and not of a competitive price. H1
Telekom also stated that it was easy to get funds for the investments, which is no longer the
case and the price should, therefore, be modified. In reply to the Agency’s claims that the
Agency’s goal is not to lower the price in question in order not to have a negative impact, that
is, discourage the investments of operators into infrastructure, H1 Telekom stresses that the
price in question should not stimulate the operator to use the ULL service but to build its own
infrastructure, which requires time and funds and does not ensure a reasonable time for the
recovery of funds.
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The Agency will not change its view that the existing price of the service in question should
not be changed until the implementation of a cost oriented price and that a significant growth
in the number of unbundled local loops since the introduction of the service clearly shows that
the price is acceptable. The Agency also, once again, stresses that the price in question is
almost the lowest compared to other countries of the European Union. Therefore, as the
Agency already stated, while the relations between retail and wholesale prices remain as they
are, the Agency thinks that the price of the service of fully unbundled access to the local loop
should not be changed until the implementation of a cost-oriented price in accordance with
regulatory obligations imposed in this Chapter. The Agency thinks that problems related to
the service of unbundled access to the local loop may not be solved by lowering the prices but
by solving other problems related to this service, which was also proposed by the Agency
under regulatory obligations (i.e. allowing operators to choose their own contractors for the
realisation of collocation premises, undisturbed access by means of won intermediary cable
between the MDF and the IDF, the altered malfunction repair procedure, a shortened time
limit for the recovery of the surplus of funds paid for the preparation of collocation premises
and putting them at disposal, the increase of penalties in case of delayed delivery of an
individual local loop, a transparent presentation of all relevant performance indicators by HT
for all operators, the opening the possibility of sub-loop unbundling).
8.2.4 Answers to comments made by OT-Optima Telekom
Optima gave joint comments referring to the analysis of the market of wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a fixed location
and the market of wholesale broadband access. For that reason, these comments have been
incorporated in both documents concerning the relevant markets in question, except for the
parts which are explicitly related to a certain market.
Optima stresses that regulatory obligations are imposed depending on the situation on
individual relevant markets and that they should not be focused only on the regulation of an
individual market but of the market in general. In that sense, all the obligations should be
balanced for the purpose of achieving the objectives of market regulation.
Before imposing regulatory obligations, the Agency must identify competition problems in
the relevant market by identifying the existing competition problems and envisaging which
problems might occur if the Agency did not regulate the market on which it established the
existence of operators with significant market power. The Agency must also ensure the
imposition only of those regulatory obligations which are necessary to deal with the identified
market problems, which is exactly what the Agency has done. In conclusion, it is not clear
what Optima finds arguable in relation to the imposition of regulatory obligations since the
Agency, on the basis of the principles of proportionality and justification, imposed those
regulatory obligations that will resolve the existing problems as well as problems which might
occur considering the current situation on the market and, each in its own way, slow down
and completely stop further development of the electronic communications market in the
Republic of Croatia.
Therefore, as it is obvious from the text of the analysis, the mentioning of possible
competition problems did not result in the imposition of all possible regulatory obligations,
which leads to the conclusion that the Agency took into account the actual situation in the
relevant market of the Republic of Croatia and imposed the regulatory obligations on the basis
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of the identified problems and in accordance with the legal basis or, more precisely, with
Article 56, paragraph 3 of the ECA.
As a result, the Agency thinks that all of Optima’s claims are unfounded and refers Optima to
Chapter 6.4 of this document where everything is explained in detail.
Furthermore, Optima states that (quote): „We think that, after having adopted conclusions on
every individual market, HAKOM should have made an analysis of all regulatory obligations
and specify which part and which concrete measures are aimed at encouraging investments,
and which part and which measures it deems justified to protect investments made by each
operator, including HT, and which measures are aimed at stimulating competition.“ As it was
already mentioned, the Agency imposed regulatory obligations pursuant to legal obligations.
Taking this into account, the Agency does not see any purpose or meaning in Optima’s
requests. First, since the Agency, while carrying out market analysis pursuant to Article 52,
paragraph 4 of the ECA, has to take into account the relevant European Commission
Guidelines on market analysis and assessment of significant market power and the current
situation on the domestic electronic communications market, which the Agency did, it is
questionable whether Optima’s comments are legally founded. Moreover, they are unfounded
because the Agency conducted a detailed and comprehensive analysis as provided for by the
ECA, that is, it analysed the markets of wholesale (physical) network infrastructure access
and wholesale broadband access. In this market analysis procedure, the Agency took into
account the further dynamics of market development.
4. Definition of the relevant market
Optima states that the Agency incorrectly understands the meaning of potential competition.
On page 12 of this document the Agency explains the difference between potential
competition and supply-side substitution. Optima stresses that there must be a difference on
the market between a potential rival and an active operator, but that the regulation of this
difference should not be based on the fact that existing operators are not facing additional
costs, which are faced by potential operators.
Since the Agency, while carrying out market analysis pursuant to Article 52, paragraph 4 of
ECA, has to take into account the relevant European Commission Guidelines on market
analysis and assessment of significant market power, the Agency took over the explanation of
the difference between potential competition and supply-side substitution from Article 2.2.
„Main criteria for the definition of relevant markets” European Commission Guidelines.
In addition to the above-mentioned, the Agency wishes to point out that Optima clearly
misunderstood supply-side substitution since it links supply-side substitution with the active
operator on the market. The Agency has never linked supply-side substitution with operators
active in the market but it tried to establish whether competitors exert such pressure that in
case of a hypothetical price increase in relation to which substitutability is established, this
service or an equivalent service may be provided by someone else without additional
significant costs. Supply-side substitution means that there is a possibility that an operator
could provide an equivalent service in the period covered by the analysis with no additional
significant costs.
4.1.1. Retail market of broadband Internet access
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Optima stresses that microwave antennae which are sometimes used to access certain users
were not the subject of the analysis. Optima thinks that effects that might be even
hypothetically caused by new technologies which are being used, although rarely, should be
analysed because their importance could increase in the upcoming three years.
The Agency agrees with Optima’s opinion that it is necessary to consider the impact of
technologies which are currently not so widespread but might have a significant influence in
the time period covered by the analysis. The Agency did not take into account the access over
microwave antennae because no operator explicitly stated in the questionnaire that it used
microwave links to provide access to end users. Therefore, the Agency did not consider this
type of access in its analysis. However, the Agency will follow the development of this
service and its influence on the broadband Internet access market and, if necessary, it will
conduct a new market analysis even before the expiry of three years.
4.1.2.4. Access over cable
Concerning access over cable, Optima pointed out that operators must use HT’s wholesale
service to be able to offer service over twisted copper pair, and they have interest in using it
because HT is the only one whose infrastructure covers the entire territory of the Republic of
Croatia. On the other hand, cable operators, although due to their recent investments into their
network they have entered the market of voice services, are not even close to cover the entire
territory of the Republic of Croatia. Furthermore, since the Agency established the national
territory as the geographical dimension of the relevant market, Optima thinks that the
potential and possibility for operators to use the infrastructure of other operators, as well as
the possibility of cable operators to offer their services, may be observed only at the national
level.
First of all, it must be emphasised that the Agency concluded on the basis of price and
functionality that access over cable represents a substitute service for ADSL access over
twisted copper pair at retail level but not at the wholesale level, as it is concluded by Optima
in its comments.
In Section 4.1.3.4 of the Agency’s document Service of broadband Internet access for self-
supply as a substitute service for unbundled access to the local loop, the Agency stressed that
it thinks that operators providing broadband Internet access service for the purpose of self
supply cannot influence the setting of prices of unbundled access to the local loop service at
the retail level by means of competitive pressure. In other words, there is no such competitive
pressure that would prevent the incumbent from increasing the price of the service in question
between 5 and 10% without regulation of the service of unbundled access to the local loop,
because operators do not have the option to switch to the service provided by some other
operator
Also, in Section 4.1.4 Supply-side substitution, the Agency gives its opinion that in case of a
hypothetical increase in the price of the service of unbundled access to the local loop no
operator will be able to, in the period covered by the analysis, replicate HT’s network
infrastructure in order to provide the service of unbundled access to the local loop due to high
costs of building own infrastructure the majority of which cannot be recovered.
In conclusion, the Agency thinks that it sufficiently emphasised that there is no demand-side
substitution because operators do not have the option to switch to another operator’s services
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or supply-side substitution because no operator will be able to, in the period covered by the
analysis, replicate HT’s network infrastructure and provide the equivalent service of
unbundled access to the local loop, not even cable operators.
4.1.3. Demand-side substitution – wholesale level
Optima stresses that the Agency’s conclusion on the substitutability between shared and full
access to unbundled local loop is not completely accurate because the Agency did not
consider all aspects of the problem. Optima states that (quote):“ in the first place, if an
operator uses full access it uses it to offer to its end user both internet access and voice
service. In case of a hypothetical price increase, an operator switching to shared access
cannot provide to its user the service equivalent to or serving to satisfy the equivalent need.“
Furthermore, Optima stresses that the Agency did not take into account its own conclusion
that investments into access over local loop are the biggest of all investments and that former
investments into access to the local loop should be taken into account as well as the impact of
the increase in the price of full access to return on these investments. It also stresses that
market analysis did not give the number of operators who are actually using the service of
shared access compared to full access to be able to discuss the substitutability of services.
The Agency stresses that the number of operators using shared access as opposed those using
full access is not of crucial importance when establishing the substitutability of services but
the question is whether operators may, in case of a hypothetical price increase of the service
of fully unbundled access to the local loop, switch to the service of shared access to the local
loop without significant costs. According to the Agency’s opinion, the relationship between
the price and investments into shared access determines whether mentioned services are
substituted services. Also, shared access allows the operator to provide VoIP of equivalent
quality to public voice service, which means that an operator may over shared access offer to
the end user services equivalent to those offered over full access.
4.1.3.1.1. Service of unbundled access to the local loop based on FttCab solution
Optima stresses that the Agency’s claims that (quote):”Considering the limitations of existing
copper pairs, it is impossible to add some DSL-technology to all pairs in a cable because in
that case mutual harmful influences (so-called crosstalk) between pairs in a cable would be
too big and would additionally limit the range and quality of transmission. Furthermore, due
to saturation, all uses do not get the same quality of broadband Internet access service and IP
television, and some copper pairs do not even support the above-mentioned services“ are
potentially dangerous because they can serve as a justification for limitations in the usage of
pairs.
The Agency stressed in the above-mentioned chapter that operators’ investments into access
infrastructure may be expected in the upcoming period in order to satisfy the needs of uses,
that is, in order to offer a wide spectrum of services such as the transmission of multichannel
HDTV (eng. High Definition Television), video on demand and videoconferences, and the
service of voice over the Internet protocol (VoIP). The Agency’s opinion is that ADSL2plus
technology will become inefficient in the upcoming years because of demands of users and
the introduction of VDSL2 transfer technology into the access network will become
necessary. If VDSL2 transfer technology is not introduced, than evolution scenarios of access
networks will be based on ADSL2plus access technology which means that the concept of
opening of new access nodes will have to be applied instead of the concept of local sub-loop
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unbundling. This concept in an unbundled environment forces beneficiaries who have their
own collocation at the existing location of the local exchange to arrange collocation premises
at a new location as well and install the necessary equipment or to cede their users to the SMP
operator.
On the contrary, in the evolution scenario of sub-loop unbundling, the beneficiary may still
provide services to its users without collocating its equipment at a distant location. Clearly, in
this case the beneficiary may not offer transfer speed equivalent to that provided by the
operator from a distant location. In this concept, beneficiaries still have at their disposal a
complete area of the access network which they had at the moment of adopting a business
decision to realise their collocation at this location but transfer speed they may provide
compared to the operator that collocated the equipment at a distant location is several times
slower.
Therefore, the Agency thinks that future evolution scenarios of broadband access networks
based on a symmetrical pair must be based on the concept of sub-loop unbundling with
VDSL2 transfer technology.
Furthermore, Optima stresses that the quality of service is not influenced only by crosstalk but
the distance of the user also may influence the lower quality of the connection, in particular in
case of ADSL service.
The Agency completely agrees that access speed depends on other factors besides crosstalk
and length of the local loop, such as: line impendance, medium signal strength and line coding
technique. Interferences in transmission over twisted copper pairs also need to be taken into
account as well as many other problems which are negligible in the transmission via POTS
channels, such as, for example, signal muffling and restrictions on the transmission range, the
existence of bridged passes and loading coils, and impendance mismatches. However, it must
be stressed that crosstalk is the dominant facto influencing the performances of DSL
transmission systems.
Furthermore, Optima stresses that, since in some cases and to some extent the above-
mentioned problems may be resolved, or at least mitigated, these as a rule are not the main
reasons for an operator’s decision to invest, and operators will invest only if they expect better
margins on their services, faster and greater availability of users and more control over
services. The existence of technical problems should be the constituent part of SLA of all
HT’s wholesale services. HT does not guarantee the quality of its services but it obvious that
the quality of its wholesale services directly influences the quality of services of other
operators, and, if HT does not intend to invest into its won infrastructure, it should bear part
of responsibility for the service provided to beneficiaries.
The Agency stresses that, as part of the obligation of access to, and use of, specific network
facilities, it proposed the imposition of the obligation to ensure the basic level of service –
SLA (Service Level Agreements) on HT, among other things, the compliance with certain
deadlines in the provision of the service of unbundled access to the local loop and related
facilities, which has been described in detail on page 66 of this document. Furthermore, the
Agency defined the time limits for delivery and penalties in case of delay on page 71 of this
document in relation to obligations proposed for HT. Some of the penalties were also
increased in order to motivate HT to deal with problems in the adequate and most efficient
way. In order to ensure the application of the imposed basic level of SLA, the Agency
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proposed that HT be imposed the obligation to publish performance indicators on a quarterly
basis or upon the Agency’s request, which has been described in detail in the part on the
obligation of transparency..
Furthermore, Optima insists that the Agency based its conclusion about the modernisation of
telecommunications infrastructure by shortening the length of the twisted copper pair in order
to increase the quality of services on the behaviour of European operators and that such
projections may be allowed in a market analysis provided that further Agency’s decisions are
not be based on such projections, including the conclusion that services that would be
provided on the basis of FttCab solution may be regarded as substitute services for the service
of unbundled access to the local loop. Optima thinks that the Agency completely forgets that
such an investment, including the time when to start and how to proceed, will be decided
upon by one operator who currently manages the majority of infrastructure, and that the
investment cycle itself (course and duration) depend on this operator’s decisions. Such a
decision still has not been adopted, and, it must be borne in mind that, when adopted, it will
directly influence the behaviour of operators using the wholesale service of unbundled access
to the local loop because every intervention into the shortening of the local loop includes an
investment for beneficiary operators. Besides, Optima claims that the Agency does not
analyse whether such an investment cycle could even be started in the current economic
situation, let alone completed and whether it will have certain effects on the market in the
upcoming three-year period. All these conclusions may and probably do have bearing on the
Agency’s position that the price for the lease of a pair is adequate and that it should not be
changed. It is therefore important that the Agency analyses with equal attention and the same
level of detail all assumptions on which it bases its decisions later on.
In relation to the above-mentioned comments, the Agency insists that in its documents it only
stated facts relating to European practice concerning investments of incumbents into their
access infrastructure by shortening the length of the copper pair to the end user (FttCab) in
order to be able to provide the service of broadband Internet access and related facilities over
VDSL technologies to end users who need greater access speed. In the current situation, the
Agency may not influence the decisions of operators to invest into their access infrastructure,
including by using FttCab concept to provide the service of broadband Internet access and
related facilities over VDSL technologies to end users who need greater access speed.
The Agency’s objective is to encourage investments and modernisation of the access network.
Another objective is to ensure that other operators are able to continue providing services on
the basis of the existing wholesale services, at least in the period covered by this analysis, and
to provide to those operators new wholesale services based on FttCab or FttH solution in
order for them to be able to compete with the SMP operator in the provision of broadband
Internet access and convergent services. Therefore, the regulatory obligations proposed by the
Agency area aimed at preventing HT from withdrawing the already granted access and at
forcing it to offer wholesale services equivalent to those used by its own retail arm to provide
broadband Internet access and convergent services.
Furthermore, the Agency’s position that the amount of the monthly fee for the service of
unbundled access to the copper-based local loop does not need to be changed is based on the
significant growth in the number of unbundled local loops since the introduction of the
service, which means that the price is acceptable. The Agency also stresses once again that the
price in question is almost the lowest compared to European Union states. Therefore, as the
Agency already pointed out, while the relationship between retail and wholesale prices
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remains as it is, the Agency feels that the price of the service of fully unbundled access to the
local loop need not be changed until the application of a cost oriented price in accordance
with regulatory obligations imposed in this chapter. The Agency thinks that problems related
to the service of unbundled access to the local loop may not be resolve by lowering the prices
but by solving other problems related to the service in question, which was proposed by the
Agency under regulatory obligations (i.e. allowing operators to choose their own contractors
for the realisation of collocation space, undisturbed access by means of won intermediary
cable between the MDF and the IDF, the altered malfunction repair procedure, a shortened
time limit for the recovery of the surplus of funds paid for the preparation of collocation space
and putting it at disposal, the increase of penalties in case of delayed delivery of an individual
local loop, a transparent presentation of all relevant performance indicators by HT for all
operators, the opening the possibility of sub-loop unbundling).
7.1.2. and 7.1.3. Obligation of transparency and the obligation of non-discrimination
Optima argues that the obligation of transparency and the obligation of non-discrimination
will be fully achievable only when operators will have equal treatment in terms of use of
telecommunications distribution channels, which is closely related to regulating access to
telecommunications infrastructure. All operators do not have a regulated status for using
distribution channels in the equivalent manner and under the equivalent conditions because of
which everyone has their own problems. Considering the new regulation envisaged by the
ECA and the introduced changes, Optima thinks that the Agency should resolve the
problem/status of distribution channels before the final imposition of all regulatory
obligations.
The Agency has fulfilled all obligations related to the rules of sharing of electronic
communications infrastructure and associated facilities (which includes the resolution of the
problem/status of distribution channels). The most important of the Agency’s obligations
were to adopt the Ordinance on the manner and conditions of access to, and sharing of
electronic communications infrastructure and associated facilities (OG 154/08) and the
Ordinance on the certificate and fee for the right of way (OG 31/09).
Therefore, the Agency thinks that there are no disputes over telecommunications channels,
but it agrees that the implementation of new provisions of ECA is necessary. As a result, the
Agency is planning to organise workshops for the presentation and explanation of the
provisions and rules concerning sharing and rights related to “right of way”.
The Agency once again explains the provisions of the ECA, which clearly prescribe that
infrastructure operators must allow to beneficiaries, with a fee and on the basis of a concluded
contract, access to, and sharing of, electronic communications infrastructure and associated
facilities. Requests of beneficiaries must be processed in the order in which they were
received. After having adopted the above-mentioned ordinances the Agency’s involvement in
dispute resolution became rarer and the number of complaints to the Agency was reduced to
the minimum. Since Optima states that it knows the examples of discriminatory behaviour of
infrastructure operators, that is, that there are differences in the use of distribution channels by
beneficiaries, it is necessary to deliver to the Agency the mentioned data that may help to
conclude that certain measures must be applied under the Agency’s competence against
everyone acting or behaving in a prohibited way.
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In relation to security instruments, Optima points out that they were justified in the market
opening process, but today they only represent the strengthening of the already strong HT’s
negotiating position. It also stressed that HT and all other SMP operators are in a more
favourable situation than other participants in the market because they have a basis to ask for
security instruments while other operators may secure their claims only during negotiations.
The Agency stresses that HT’s RIO for the service of unbundled access to the local loop
currently reads:„If the Beneficiary has, for a period of one year from the conclusion of the
Contract on Access to the Local Loop, regularly paid all of its payment obligations for
services provided by T-Com on the basis of the Contract, the obligation to submit a certain
security instrument shall no longer apply to the Beneficiary after the expiry of that time
period.“ The Agency deems it justified to agree upon a certain security instrument when
concluding a contract on wholesale service in accordance with the provisions of the
Ordinance on reference offers. After the expiry of one year, if the operator has paid all bills on
time, the operator may be exempt from the obligation to keep delivering security instruments
because such a treatment might result in inequality between operators.
7.1.6. Other regulatory obligations
Optima’s claim about the unfoundedness of the Agency’s conclusion concerning the
imposition of a regulatory obligation/measure that would regulate the undue use of
information is completely incorrect. Optima’s position that a legal provision, more precisely,
Article 66, paragraph 5 of the ECA, is not valid, that is, it does not represent a sufficient basis
for the treatment of data collected during negotiations/arranging access and interconnection is
contrary to basic legal principles. The question is, then, what does Optima regard as a
“stronger” legal means of regulation than the law and bylaws. The provision in question is
coercive and non-compliance implies misdemeanour i.e. it is regarded as a serious violation of
ECA which is punishable by a fine from HRK 100,000.00 to HRK 1,000,000.00 for a legal
person and 20,000.00 to 100,000.00 for the responsible person in the legal person.
8.2.5 The Agency’s comments
The Agency wishes to amend the condition mentioned under the obligation of access,
referring to HT’s obligation to, upon the operator’s request, within 4 months install control
meters for measuring actual power consumption by the operator for all existing collocation
premises by adding that this obligation must include a special control meter for energy and
that prices must be based on actual costs. .
The Agency also thinks that the beneficiary must be allowed to choose its own supplier of
control meters on the basis of it’s won business decisions, including the contractor to install
the meters in the main distribution cabinet in collocation premises. HT must be informed
thereof on time. This amendment is in accordance with the already propose amendments
relating to the possibility for operators to install air-conditioning in collocation premises by
themselves, to user external contractors for the realisation of collocation premises or to be
allowed access by means of their won intermediary cable between the MDF and the IDF. In
this way the Agency is trying to avoid the charging of additional costs to other operators, that
is, behaviour described in Chapter 6.4.2.3 of this document on undue requirements and ensure
the increase of competitiveness at the retail market. The Agency finds this obligation
necessary to prevent the leveraging of HT’s significant market power onto the downstream
retail market because this allows new operators to choose between different options and thus
influence their own costs. It also prevents the linking of the service of installing and
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procurement of control meters with HT’s exclusive right to procure, deliver and install them.
Although the existing reference offer defined the manner of payment of electricity
consumption, the Agency finds it necessary to transparently show in obligations that HT must
charge the consumed power at a price it pays to its own electricity distributor.
The Agency has, by mistake, failed to specify in the document which was subject to public
consultation that HT must submit to the Agency contracts concluded on the basis of the
reference offer for unbundled access to the local loop and related facilities within 15 days
from their conclusion, which was proposed as part of the obligation of non-discrimination to
SMP operators in other documents of market analysis which where subject to a public
consultation97
. This is necessary so that the Agency might verify whether the SMP operator is
complying with the obligation of non-discrimination. In case of non-compliance with the
mentioned obligation, and on the basis of the concluded contract, the Agency would be able to
react on time. Consequently, since the Agency sees no reason not to impose the mentioned
obligation on the SMP operator on this market, and taking into account the fact that no
participant in the public consultation commented on the obligation in question on other
relevant markets, the Agency shall amend the document accordingly, as part of the obligation
of non-discrimination.
Furthermore, considering HT’s comment on the market of call origination from public
communication networks provided at a fixed location (quote): “When calculating
interconnection prices the Agency used the exchange rate of Kuna against the Euro
amounting to HRK 7.1748, as an average of the mean exchange rate of the Croatian National
Bank in the period between July and December 2008. HT states that this exchange rate is no
longer applicable and does not reflect the current situation and proposes to the Agency to
apply the exchange rate which is current at the moment of adoption of this analysis, and since
the Agency used this exchange rate to determine the price of shared unbundled access to the
local loop, the Agency finds it necessary to comment on this comment in a document.
The Agency thinks that the Croatian National Bank’s exchange rate should be applied because
this is a competent institution for determining the level of the exchange rate. Furthermore, due
to exchange rate fluctuations during calculations of reference values into kunas, an average
exchane rate of the Croatian National Bank should be applied and the Agency thinks that it is
necessary to cover the last six months. This was also Vipnet’s proposal which the Agency
received in an administrative procedure for previous amendments of Vipnet’s reference offer
(Class: 344-01/07-01/488). In other words, the Agency thinks that the period of last six
months is a period which gives a relevant image on exchange rate fluctuations.
However, taking into account sudden changes in exchange rates caused by the world
economic crisis, the Agency finds it justified to allow both HT and the Agency to adjust the
price of the service of shared unbundled access to the local loop to the new average exchange
rate of kunas against the euro if the average exchange rate for Kuna against the Euro,
according to data from the Croatian National Bank, changes by more 10% compared to the
exchange rate used by the Agency to calculate the price of the service of shared unbundled
access to the local loop for every year.
97
Except in the document on analysis of wholesale (phyiscal) network infrastructure access at a fixed location
where this will be added as well..
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Accordingly, if the average exchange rate of Kuna against the euro increases by 10% at least,
HT may charge prices of the service of unbundled access to the shared access to the local loop
that adjusted to a new exchange rate of Kuna against the Euro.
In other words, if in a period of one year after the entry into force of this analysis the average
CNB’s exchange rate for the last six month amounts to the minimum of HRK 7.8923 Kuna
for 1 Euro, HT will be forced to change the price of the service of shared unbundled access to
the local loop, calculated on the basis of the methodology from Chapter 7.1.4 of this
document on the basis of a new exchange rate. More precisely, if the above-mentioned
happened in a period of one year after the entry into force of this analysis, the average price of
the service of shared unbundled access to the local lop would no be calculated at the exchange
rate of . HRK 7.1748 for 1 Euro and amount to HRK 21.46, but it would be calculated at the
exchange rate of HRK 7,8923 for 1 Euro and amount to HRK 23.60.
On the other hand, if the average exchange rate for Kuna against the Euro fell by at least 10%,
the Agency will be able to implement a new price for the service of unbundled access to the
local loo, which will correspond to a new exchange rate of Kuna against the Euro.
More precisely, if in the period of one year after the entry into force of this analysis at a
certain point in time the average mean CNB’s rate for the last six months falls by at least 10%
(1€=6.4573 HRK ), compared to the exchange rate applied by the Agency in this analysis
(1€=7.1748 HRK), the Agency will be able to turn the price for the service of shared
unbundled access to the local loop calculated on the basis of a method described in Chapter
7.1.4 of this document into the amount in kunas on the basis of the new exchange rate. More
precisely, if this happens in a period of one year from the entry into force of this analysis, the
average price for the service of shared unbundled access to the local loop would not be
calculated at the exchange rate of HRK 7.1748 for 1 euro and amount to HRK 21.46, but at
the exchange rate of HRK 6.4573 for 1 euro and amount to HRK 19.30.