The Austrian telecoms regulator RTR recently reviewed and partially deregulated the broadband access market using a market definition described by the European Commission as a “far-reaching move”.
At the retail level, RTR considered that residential and business broadband access should be considered as separate markets. More importantly, in the residential retail broadband access market, RTR not only included DSL connections (in line with most EU regulators), but also mobile broadband (MBB) and cable TV (CATV) connections.
Following from this market definition, RTR carried out a “three-criteria” test (i.e. the test that represents the necessary prerequisite for ex-ante regulation), and concluded that the test was not passed; hence retail broadband access markets were not susceptible to ex-ante regulation. The reason for this was an observed trend towards effective competition, due to infrastructure-based competitive pressure exercised by mobile network operators. Therefore, when moving to the analysis of the wholesale broadband access market, RTR's starting point was the assumption that wholesale regulation would not be needed on the wholesale broadband access market for residential customers.
At first the Commission raised serious doubts about this market definition. However, RTR presented convincing evidence during additional data submissions and conference calls in October and November 2009, and in December 2009, on the basis of circumstances closely related to the specificity of the Austrian market, the Commission accepted the inclusion of mobile and broadband connections in the retail residential market. The specific circumstances included:
- mobile broadband was used by around 35% of residential customers in March 2009, compared to DSL at 40% and CATV at 22%. Furthermore, the share of mobile broadband connections increased strongly between 2007 and 2009, accounting for approximately 70% of new broadband lines in the first three months of 2009
- the four mobile HSDPA networks in Austria already covered between 70% and 94% of the population
- a price analysis based on price regressions showed that prices of fixed and mobile broadband connections were moving closer together and that fixed broadband providers directly react to price reductions introduced by mobile broadband operators
- 75% of residential mobile broadband customers used their connection mainly on a stand-alone basis, rather than coupled with a fixed connection. RTR also noted that most mobile broadband connections are used at a fixed location (e.g. at the customer's home).
For the moment, the features of the Austrian mobile broadband market still appear as an exception in the EU broadband landscape – our benchmarks indicate that mobile broadband connections as a proportion of total broadband lines is much higher in Austria than elsewhere – and as the Commission itself stated, “fixed and mobile retail broadband services are normally not belonging to the same market”.
Nevertheless, future developments in the mobile and fixed broadband markets will highlight whether the Austrian case will remain an exception, or whether high speeds and widespread take-up of mobile broadband could lead to progressive deregulation on the fixed broadband side.
Analysys Mason is an active leader in regulatory market reviews. We help regulators and other government bodies assess the level of competition in telecoms markets and impose remedies in markets that lack effective competition. Our market reviews also help operators in developing a regulatory strategy by anticipating, or reacting to, decisions by regulators.
For more information, please contact Elia Mariani at elia.mariani@analysysmason.com.