Paris, 7 October 2014
Working to achieve national harmonisation to increase the chances of commercial success for fibre networks nationwide
The pace of shared optical local loop rollouts has increased considerably in recent months (38% increase in eligible premises, or 810,000 additional premises passed in 2013), and is expected to continue to do so, especially in the country's more sparsely populated areas. The future development of optical fibre networks, and the successful sale of access products on a large scale will depend in particular on having wholesale and retail markets that are economically and technically homogenous nationwide.
This homogeneity is not guaranteed, however, since, unlike with the copper local loop, a wide variety of public and private sector undertakings are involved in deploying optical local loops. It is thus essential that the wholesale market's "industrialisation" progress apace with network rollouts. This is why, as it announced back in November 2013 (1), ARCEP continues to work within the existing symmetrical regulatory framework on clarifying the pricing and operational aspects of accessing shared optical local loops, which apply to all operators and across the whole of France
A generic pricing model to increase clarity for market players and encourage consistent pricing
Achieving homogeneous pricing schemes is part of the "regional equality and solidarity" objective that is a central tenet of the Superfast Broadband in France action plan. It also meets European Union guidelines on State aid in support of the rapid deployment of broadband networks: these guidelines lay out the principles of benchmarking the wholesale rates charged for networks receiving public monies and those relying solely on private initiative.
It is within this environment that a number of parties (both operators and local authorities involved in fibre network rollouts) expressed to ARCEP their need for greater clarity on the mechanisms used to determine wholesale tariffs, as provided for in the regulatory framework. This increased clarity will in turn allow them to establish a more accurate business plan:
- by having the primary investors, which are deploying the networks, take the commercial risks and profitability outlook attached to the creation and wholesale operation of these networks into account when setting their pricing models;
- by stimulating the sale of network products through the supply of long-term guarantees that all operators will be given fair and reasonable terms of access.
To tackle these issues, ARCEP held a public consultation from 16 May to 11 July 2014 on a generic pricing model for accessing fibre-to-the-home networks outside very high-density areas (2).
With the consultation (which received 16 responses, including six from operators and eight from local authorities and local authority associations) complete, ARCEP has been able to ascertain that most stakeholders approve the general principles of the suggested model, while expressing some reservations about certain aspects of its implementation.
The chief remarks from the contributors pertain to specific aspects of the model's implementation, for which there is no consensus at this stage. This does not, however, undermine the underlying principles of the chosen modelling method. Moreover, ARCEP did not receive any alternative model for pricing regulated offers, for the section located between the concentration point and the optical branching unit. ARCEP also notes that a number of contributors have asked that more work be done in this area, and that the modelling exercise be expanded to include all shared optical fibre network engineering, outside of very high density areas.
As the public consultation confirmed, if this pricing model is intended to apply, on a comparable basis, to all undertakings operating a fibre-to-the-home network regardless of whether they come from the public or private sector, public initiative networks do have certain specific properties that need to be taken into account.
First, a public initiative network's wholesale rates depend on the business model employed by the building operator, in other words the relationship between its costs and revenue, which falls under the scope of the model published by ARCEP, but also on the economic relationship established between the local authority and its contractual partner, which can be based on one of several contractual arrangements (partnership, public service concession, lease, etc.) and which falls outside the scope of the model published by ARCEP.
Second, the wholesale rates that a public initiative network can charge are subject to European State aid regulations (3) which impose a principle of comparability with the rates established in those areas where operators are deploying superfast access networks without State aid. These wholesale rates are thus subject to guidelines, on top of the symmetrical regulation put into place by ARCEP, which are based not on actual rollout costs and the network revenue take into account, but rather on benchmark tariffs observed in more sparsely populated public initiative areas.
Because of this particular aspect, determining the proportionate level of Sate aid and, at the same time, establishing a balanced economic relationship between the local authority and its contractual partner appear vital to ensuring that the building operator apply a rate schedule that is consistent and compliant with European guidelines. The level of State aid must thus apply equally to all of the wholesale rates charged by a public initiative network, particularly between the co-financing offer, the line rental offer and, when applicable, the activated service. This consistency is essential to ensuring the legal certainty of local authorities' financing plans over time.
ARCEP plans on continuing to work with all of the stakeholders on expanding the operational scope of the pricing model, to take into account the sections located upstream from the concentration point, and downstream from the optical branching unit. This work will also enable the Authority, and the sector's stakeholders, to fine tune the implementation of charging principles proposed for the section located between the concentration point and the optical branching unit. The new documents resulting from this work will be subject to consultation before the end of 2014 and, if necessary, supplementary models will be published.
This work on pricing is part of a series of efforts being carried out by ARCEP to encourage the "industrialisation" of superfast network rollouts, and shorten the time to market for access products.
ARCEP is thus also preparing a draft decision to define the specifications of an accounting system that retraces the costs and revenue tied to the construction and operation of shared optical local loops. The aim of the system will be to provide input for ARCEP's pricing model. It will make it possible to establish time series of accrued costs and revenue, which will be compared with the original hypotheses, to then adjust the prices if necessary. This draft decision will be submitted to consultation before the end of the year.
Alongside this pricing and accounting work, ARCEP held a consultation on a draft decision on the operational processes of network sharing, which ended on 26 September 2014. The goal was to establish a detailed list of all of the processes (exchanging information on eligibility, ordering a line, etc.) to be able to develop and implement a standardised information system between operators.
All of this work is thus helping to strengthen the regulatory framework, and to assist stakeholders in their efforts to achieve structured and consistent rollout and marketing processes - all with the ultimate aim of meeting the challenge of a successful, rapid and large-scale transition to fixed superfast broadband in France.