Implementation of regulatory rules

Since the shift in 1994–95 in the Danish approach to telecommunications regulation, the im-plementation of regulatory rules has generally been seen as advanced. Compared to other EU countries, this can be seen as justified by the track record including, e.g., the implementation of the new regulatory framework during 2003. Looking into the details of the implementation of the regulatory rules, there has been and is a number of problems and rather different opin-ions on the character of the problems depending on the position of actors.

4.9.1 Impediments of implementation

The NRA competition report (May 2003)⁵⁵ concluded that there are a few, but no serious, legislative gaps and also that the telecommunications industry does not take sufficient advan-tage of the opportunities provided to them by the legislation, such as submitting cases to the NRA or requesting mediation.

On the basis of the public consultation, and also the political discussions following the report, steps were taken to eliminate the issues/barriers raised. For instance, new legislation was introduced on 1 April 2004 to clarify that ATM networks are covered by the national legisla-tion already in force. In order to prevent a first-mover advantage for the incumbent operator when it introduces new services, a new legal provision, introducing a higher penalty (based on competition law practices) for infringement of the transparency obligation in relation to the publication of information on new interconnection products, has been included. The alterna-tive operators preferred a so-called ‘standstill’ provision of 6 months to be imposed on the fixed line incumbent operator. This was, however, not considered to be proportionate vis-à-vis the fixed line incumbent operator. Some non-legal initiatives also followed from this re-port, such as the introduction of a flexible system for customers’ change of DSL-providers and the setting of targets for the measurement of the quality of telecommunications products.

The most important regulatory controversy in the past half decade has been around conditions for operators wanting to use the PSTN access network for DSL purposes. The competing operators complained in 2001 that they were squeezed out of the market, with respect to price squeeze as well as non-price squeezing mechanisms. The price squeeze issue was examined by the competition authority and the non-price squeeze by the NRA. In neither case, however,

55 ITST (IT- og Telestyrelsen, the NRA): ‘Telekonkurrenceredegørelse 2003’, ITST.

did the authorities find grounds for accusing the incumbent operator for abusive behaviour.

Still, some of the procedures used by TDC when receiving requests for DSL interconnection have been made more efficient.

The issue presently highest on the political agenda is the price of shared access. In Denmark, the shared copper access price is half the price of complete unbundling. This is seen as unfair by the operators competing with TDC, the argument being that TDC in this way gets its costs covered 150%. Furthermore, it is claimed that the unbundling pricing policy holds back the development of VoIP via DSL. If end-users close their PSTN subscription and solely rely on VoIP via DSL, they will still have to pay a fee corresponding to the subscription fee to the incumbent, if they use the incumbent as DSL provider, or to an alternative DSL provider, as these providers will be charged the full LLU price by the incumbent and will pass this on to the end-users to the extent possible.

Even though interconnection is the central issue, there are also two recent non-interconnection cases, which can illustrate the issue of infrastructure and service competition in Denmark. The first case deals with the public utility electricity network suppliers and their telecommunica-tions activities. In their ducts they can also deploy fibres for telecommunicatelecommunica-tions and offer fibre to the curb or building, etc. This activity has hitherto been seen as a positive develop-ment by the policy and regulatory authorities. However, in the spring 2004, the incumbent TDC started criticizing this activity with the argument that there is a danger that the electricity suppliers will cross-subsidise from their electricity activities to their telecommunication ac-tivities. Furthermore, the argument has been put forward that deploying these kinds of parallel infrastructures is a waste in a societal perspective. Lately, these arguments have had some following, and the competition authority has examined the claim of cross-subsidy from elec-tricity to telecommunications but found it unsubstantiated.

The other case is concerned with the new WiMax (802.16) technology. TDC has acquired a license to operate services in a WiMax band but has not yet the immediate intension to use the frequencies. WiMax is seen as a potentially important new access mode, and TDC has wished to have the opportunity to use this technology at a point of time. Another operator has also acquired a license and has the intension to start operating WiMax based services in February 2005. However, the surge for WiMax frequencies has led to NRA to put a halt on distributing licenses for WiMax in order to get time to examine the potentials in this market segment.

4.9.2 Litigation

The new entrants have stated that there have been and still are three main problems in the implementation of regulatory rules:⁵⁶

• The demand for ‘double subscription’, i.e. a subscriber to a new entrant DSL service using the TDC network has to pay the equivalent of a telephony subscription

• The procedure to acquire full ‘raw copper’ LLU for ADSL and the obstruction of the emerging VDSL by TDC with reference to ‘technical difficulties’

• The collocation procedure is obstructed by TDC with reference to ‘technical difficulties’

The first issue is still not solved seen from the point of view of new entrants; several NRA decisions largely accommodating new entrant views have been made on the two other issues, but the problems keep coming back⁵⁷.Based on this, the new entrants believe that the NRA should focus more attention on new technologies/ services; they claim it is difficult to intro-duce new products and that they have not always been able to roll out the products they want.

Sometimes the products are not yet covered by existing legislation, and by the time they are, the alternative operators normally lag behind the fixed line incumbent operator. This issue should, in principle, be solved now since a penalty has been introduced in relation to the transparency obligation for new interconnection products.

During 2004 the issues of access to full LLU and collocation surfaced again in relation to VDSL. TDC declined to give Cybercity (a leading new entrant on the DSL area) access to deploy VDSL on ‘raw copper’ and it declined Updata access to the so-called ‘forefront tech-nique houses’. These houses are increasingly used to give more subscribers access to VDSL services with their demand for a short distance between the subscriber and the ‘switch’. In January 2005, the NRA ruled that it is not a valid argument that VDSL as such will disturb the network. TDC has to allow alternative operators to offer VDSL over ‘raw copper’. With respect to access to ‘forefront technique houses’, the ruling was that the law/ regulation does not guarantee access to a specific physical location if capacity does not allow for this; if ac-cess cannot be granted, the SMP operator (TDC) has to provide transport free of charge to another access point. This is potentially a tricky ruling seen from a new entrant position, as

56 All decisions and rulings of the NRA are listed on their website, see http://www.itst.dk/

57 Interview with the SAT-group (Samarbejdsgruppen af Alternative Teleoperatører) of alternative operators, December 2004.

nothing is said about the quality of service of the transport from the desired access point to the point where TDC actually grants access. Based on experience, the new entrants foresee that this may create problems for high quality/ high speed services, which are offered transport on

‘a below the relevant standard-line’.