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4. Competition and infrastructure bottlenecks

 

This module summarises Chapter 4 of the Toolkit which focuses on two fundamental issues concerning the availability of innovative and competitive broadband access services and applications. The first is policy making and regulation to encourage competition. The second is good practices in this area intended to address such bottlenecks as access to essential facilities for deploying broadband services. Special attention is paid to dominance issues and regulation at the wholesale level, the key issues for regulators in the LAC area.

Explore this module

Main policy objectives
Tools for measurements and analysis
The LAC region
Leading good practices

 

Main policy objectives

The main high-level policy objective for opening broadband markets in the LAC region is to promote competition along the entire value chain for all actors (including new entrants and alternative providers). This general goal can be enhanced by some specific policy objectives, such as:

  • Establishing an investment-friendly environment that facilitates both national and international investment, as well as reasonable regulatory certainty.

  • Lowering, and where appropriate, eliminating administrative entry barriers; simplifying procedures, time and costs for obtaining licenses to deploy networks; as well as easy, quick and efficient access to scarce resources such as numbering and spectrum.

  • Facilitating efficient access to rights of way and passive infrastructure deployed by other actors, in particular market players with a dominant position.

  • Ensuring effective and efficient interconnection among the different actors.

  • Facilitating demand-side competition by reducing switching time and costs; promoting effective and rapid number portability in fixed and mobile markets; and monitoring and controlling retention clauses and penalties for switching operators.

  • Monitoring and assessing dominance in the different markets for both mobile and fixed broadband access; taking corrective measures against any dominant position in the geographical areas that lack competition.

  • Ensuring access to infrastructure controlled by dominant operators that is difficult to replicate (usually qualified as essential facilities), as well as encouraging network sharing among all market players, ideally through their own commercial negotiations, to reduce investment and accelerate the rollout of broadband.

Fulfilment of these policy objectives facilitates competition and investment by operators, maximises coverage of broadband services, reduces prices for the final consumer and encourages innovation in broadband services.

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Tools for measurement and analysis

The collection and analysis of data are crucial in setting and monitoring the implementation of policy objectives, as well as for adapting specific policy or regulatory measures as necessary, and benchmarking with other countries, as addressed in Chapter 2 on regulatory frameworks and digital strategies. To inform policies aimed to promote competition, the following assessments are advised:

  • Collecting data on investment by market players.
  • Monitoring competition.
  • Assessing infrastructure bottlenecks and issues related to the difficulty in accessing the relevant inputs needed to provide services (Box 4.1).
  • Monitoring access to rights of way.
Box 4.1 Key performance indicators for competition and infrastructure bottlenecks Examples of KPIs for competition:
  • number of operators in each market
  • revenues and subscribers for the fixed and mobile markets by operator
  • market shares in terms of revenues/subscribers, concentration indexes
  • evolution of prices (typically baskets of services)
  • numbers ported among operators (fixed and mobile), portability times (average and deviation) and number failed portability requests
  • broadband speed (fixed and mobile) contracted and measures on real speeds
  • broadband subscribers by technology
  • data on volumes and growth in broadband traffic
  • ata informing fixed-mobile broadband substitution
Some examples of KPIs for infrastructure bottlenecks:
  • access supported by different technologies deployed by different providers (e.g. number and percentage of copper lines, fibre access, number of mobile base stations and coverage relative to geographic area and population density)
  • prices for termination rates (for both fixed and mobile)
  • number of unbundled and bitstream-based accesses, as well as, when possible, number/length of ducts available and used by alternative operators
  • availability of backbone infrastructure and Internet exchange points (IXPs) (relative to traffic and country dimensions)
  • number of circuits and leased lines provided to alternative operators by the incumbent (per technology and speed)

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Overview of the situation in the LAC region

In the LAC region, a large variation obtains regarding competition and infrastructure bottlenecks. Different geographical areas within each country also show a wide variation, as is the case in any other region of the world.

In general, recent years have seen an increase in competition, especially in mobile markets where new entrants are competing with incumbents. However, by comparison with most OECD countries, the LAC region has room for competition both in fixed and mobile broadband markets. In many of countries, market shares are highly concentrated. Most new entrants in these markets also face infrastructure bottlenecks, such as access to rights of way, passive infrastructure and international gateways.

The reasons for this lack of competition, especially in large urban areas where there is room for several operators to compete on prices and services, are further analysed in the Toolkit publication.

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Good practices

Significant advances have been made in competition in the LAC region in the last few years, but in general, regulatory measures are needed to encourage entry and investment by new operators, as well as to encourage price competition and innovation.

Good practices to encourage competition in both fixed and mobile broadband markets include:

  • Improved authorisation and licensing processes for new entrants, which are still burdensome in many countries. Licensing processes should be faster and simpler, and fees for registration should be as low as possible, aimed to cover associated costs, following when possible a registration-based authorisation process not linked or specific to any service.

  • Foreign investment restrictions in the broadband access market, where they exist, should be lifted to maximise funding of networks and service deployment needed in the area, as well as to encourage competition. With a few exceptions, most of the LAC countries do not apply restrictions to foreign investment.

  • To ensure a level playing field, state-owned operators should be regulated and operate under rules and regulations as close as possible to those that apply to private operators. The administrative body responsible for overseeing the ownership of state-owned operators should be separated from policy-making administrative bodies.

  • Interconnection prices for fixed and mobile voice are still high in a number of LAC countries, leading to on-net/off-net differentiation, raising prices for voice services and limiting competition by small operators and new entrants. As broadband services are usually marketed with voice services, this also effects broadband competition. Ensuring that interconnection prices are public and cost-oriented and in line with prices in other regions where competition is thriving is good practice. At the same time, ensuring rapid and efficient number portability procedures in both fixed and mobile services is critical to facilitate switching by consumers and to develop competition. Countries that have still not implemented number portability should prioritise this issue.

  • The prices for Internet access are in general very high in the region, resulting in high retail prices for broadband access. Regulators should encourage IXP deployment, development of local data centres, encourage backbone deployment (see Chapter 8 on regional integration), ensure Internet openness (see Chapter 7) and monitor prices for Internet interconnection.

  • Regulatory authorities should as a general rule refrain from regulating emerging services too early, except where justified, such as for consumer protection.

  • Customer retention practices must be monitored. If periods for customer retention are too long, regulatory measures can limit the lock-in period and set conditions for customer retention. This can help improve competition.

  • Network sharing and co-investment should in general be encouraged by regulators. Administrative barriers for co-investment should be lifted, as this can significantly reduce investment needed to provide services. Regulators should monitor network sharing and co-investment agreements, setting conditions when needed to prevent undesirable negative impacts on competition.

  • Rights of way are an important area where national administrations and regulatory authorities can take measures to reduce barriers to entry. National harmonising administrative procedures, setting rules for quick and reasonable fees, one-stop-shopping procedures, as well as guidelines for municipalities are all important to ensure that operators do not face high administrative barriers in deploying networks.

In the context of mobile broadband, which can play an increasingly key role in the region for network expansion and competition for broadband services, competition can also be encouraged by:

  • auctioning more spectrum for broadband mobile access, encouraging new entry in the market (see Chapter 3 on spectrum management)

  • reviewing the regulatory framework to ensure that MVNOs have no regulatory barriers to entering the market, and if needed, imposing regulatory obligations on MNOs to facilitate wholesale access for MVNOs

  • imposing obligations for national roaming access when needed, to facilitate competition from new entrants, while they are deploying their network and for a time limited period

  • SIM lock-in practices should be monitored, and regulation may be applied to ensure SIM unlocking for customers under reasonable circumstances, e.g. when the terminal has been completely paid for.

In the context of fixed broadband, competition can also be encouraged by ensuring that in-house building wiring is not a barrier for competition. Another expedient is regulating existing in-house building wiring sharing, as is regulation to ensure adequate passive infrastructure in new buildings configured to accommodate several competing in-building wires.

Dominance is a key factor preventing competition, since dominant operators are in a position to set high prices and stall or prevent entry by new actors. Analysis of dominance in relevant markets must be performed regularly, since it provides the evidence base for subjecting dominant operators to regulatory measures aimed to facilitate entry of new market actors. Good practices in this area include:

  • Performing dominance market analysis on a regular basis (every two to four years) using recent data collected from operators, and applying sound methodologies that address not only market share, but other structural parameters in the market. A preliminary market analysis must be subject to public consultation.

  • Regulators must have clear powers, set out in the regulatory framework, to impose regulatory measures derived from market analysis. These regulatory measures should be justified, be adequate to address the competition problems, and should be the least burdensome possible.

In general, the regulatory measures applied should be focused on the wholesale market and aimed at facilitating access of alternative operators to essential facilities. Bitstream, local loop unbundling, fibre unbundling, duct access, trunk services supported by submarine cables and wholesale access to leased lines are the typical wholesale access measures to consider.

Setting cost-based maximum prices for wholesale access and ensuring that an adequate and effective reference offer is prepared by the dominant operators are key issues for ensuring success and cultivating competition. The extensive experience in OECD countries can be used to address these issues.

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BROWSE TOPICS OF THE TOOLKIT

Introduction •  Regulatory frameworks and digital strategies •  Spectrum policy •  Competition and infrastructure bottlenecks •  Extending broadband access and services •  Affordability, government charges and digital inclusion •  Convergence •  Regional integration •  Skills and Jobs •  Business uptake, entrepreneurship and digital content •  E-health •  Digital government •  Consumer protection and e-commerce •  Digital security management •  Privacy protection
 

 

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