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Summary

The recent proposal of the Romanian regulator, ANCOM, to entirely deregulate wholesale broadband access provides further evidence that broadband markets vary widely from country to country. If passed in its current form, the statement would make Romania stand out among the EU countries. Some form of regulation is still present in nearly all EU countries, because the wholesale markets for local and central access at a fixed location are deemed to warrant ex-ante regulation by the European Commission, which included them in its 2014 Recommendation on Relevant Markets.

Although the EC is likely to voice concerns at ANCOM’s departure from its recommendations, it will also have to take account of specific factors affecting the Romanian broadband market, which is seeing steep growth in the uptake of high-speed broadband: 50% of subscriptions were 100Mbps connections at the end of 2014, twice as many as at the end of 2013.

The EC will have to take account of the unique characteristics of the Romanian market

Although the EC has recently supported light-touch regulation of fiber networks, it has consistently deemed wholesale broadband markets to warrant some form of ex-ante regulation in all its recommendations on relevant markets since 2003. However, it will also have to take account of the facts that fiber networks have a limited footprint in the country and that current market conditions suggest that high-speed broadband can already be offered at competitive prices in Romania. In particular, the EC’s Digital Agenda Scoreboard shows that prices for 100Mbps connections have seen a steep downward trend and are below the EU28 average. This is quite striking, considering that these connections account for approximately 50% of total broadband subscriptions in the country.

The Romanian broadband market has always had certain distinctive traits. The only regulated operator, Romtelecom, is not the dominant player at the retail level; it holds a 30.6% market share, compared to RCS’s share of 47.2%. However, it runs the DSL infrastructure, the only one subject to regulatory remedies as per the market analysis of 2010. By contrast, the dominant technology in the market is UTP/FTP cable, which is used by RCS and the many other, smaller players with a local presence (more than 750, according to the regulator). These operators tend to invest in their own infrastructure. This must have led ANCOM to its decision to deregulate, despite the presence of a large national operator whose dominance of the market is likely to remain unchallenged in the coming years. ANCOM did not regulate any other technology in its previous analysis, including FTTH and UTP/FTP, despite the technical feasibility of wholesale unbundled offers on such technologies.

On the other hand, ANCOM’s stance might damage some operators that currently rely on Romtelecom’s infrastructure – mainly mobile operators such as Vodafone and Orange that also offer fixed services. These operators have already voiced their concerns and claim that regulation should instead be confirmed and extended to RCS as the biggest operator in the country. However, it might be difficult for them to make a compelling case to the regulator, given that they account for only a small share of the fixed broadband market and bundles of fixed and mobile services appear to have little impact on competition in the country’s broadband market.

Appendix

Further reading

Wholesale Broadband Access Benchmarks: 3Q15, TE0007-000945 (September 2015)

Regulation of wholesale broadband access differs widely across the EU, TE0007-000899 (April 2015)

Superfast-Access Policy Tracker: 2014, TE0007-000825 (September 2014)

Author

Luca Schiavoni, Senior Analyst, Regulation

luca.schiavoni@ovum.com

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