Commission communication concerning the review under competition rules of the joint provision of telecommunications and cable TV networks by a single operator and the abolition of restrictions on the provision of cable TV capacity over telecommunications networks
Date: 1998-03-07
Institutions: European Commission
Subjects: cable distribution, competition law, supplies contract, telecommunications, telecommunications equipment, transmission network

C  71/4

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7.3.98

Commission  communication  concerning  the  review  under  competition  rules  of  the 
joint
provision  of  telecommunications  and  cable  TV  networks  by  a  single  operator  and  the  abolition
of  restrictions  on  the  provision  of  cable  TV  capacity  over  telecommunications  networks

(98/C  71/04)

(Text  with  EEA  relevance)

SUMMARY

distinctions  between  previously  different  markets  are
disappearing(cid:216)(ˇ).

1.(cid:217)The  establishment  of  a  framework  of  liberalisation
of  telecommunications  and  cable  networks  in  the
European  Union 
is  scheduled  to  take  place  on
1  January  1998  in  most  EU  Member  States(cid:216)(˛).  Key
principles  underpinning 
liberalisation  process
have  been  the  introduction  of  competition  into  tele(cid:220)
communications  markets,  which  increase  the  choice
available 
telecommunications
services.  This  will  result  in  lower  costs  of  telecom(cid:220)
munications  services  and  a  wider  variety  of  services
on  offer.

consumers  of 

this 

for 

2.(cid:217)This  period  of  liberalisation  has  also  been  marked  by
an  enormous  leap  forward  in  terms  of  technology  in
telecommunications  and  the  associated  digital  tech(cid:220)
nologies 
services,
including  the  Internet,  and  new  data  communi(cid:220)
cations  such  as  electronic  mail.  These  technologies
that
increasingly 

and  merge, 

broadcasting, 

interactive 

overlap 

so 

of 

(˛)(cid:217)The  requirement  to  progressively  open  the  telecommuni(cid:220)
cations  markets  in  the  European  Union  until  1  January  1998
is  set  out  in  Commission  Directive  90/388/EEC  of  28  June
1990  on  competition  in  the  markets  for  telecommunications
services  (OJ  L  192,  24.7.1990,  p.  10,  as  amended  by
Commission  Directive  94/46/EC  of  13  October  1994,
satellite  communications,  OJ  L  268,  19.10.1994,  p.  15,
Commission  Directive  95/51/EC  of  18  October  1995,
abolition  of  restrictions  on  the  use  of  cable  television
networks  for  the  provision  of  already  liberalised  telecom(cid:220)
munications  services,  OJ  L  256,  26.10.1995,  p.  49,  Corri(cid:220)
gendum  OJ  L  308,  29.11.1996,  p.  59,  Commission  Directive
96/2/EC  of  16 
January  1996,  mobile  and  personal
communications,  OJ  L  20,  26.1.1996,  p.  59  and  Commission
Directive  96/19/EC  of  13  March  1996,  full  competition  in
telecommunications  markets,  OJ  L  74,  22.3.1996,  p.  13.
The  Commission  granted  additional  transition  periods  to
five  Member  States  (Ireland:  1  January  2000,  Commission
Decision  97/114/EC  of  27  November  1996,  OJ  L  41,
12.2.1997,  p.  8;  Portugal:  1  January  2000,  Commission
Decision  97/310/EC  of  12  February  1997,  OJ  L  133,
24.5.1997,  p.  19;  Luxembourg:  1  July  1998,  Commission
Decision  97/568/EC  of  14  May  1997;  OJ  L  234,  26.8.1997,
p.  7;  Spain:  1  December  1998,  Commission  Decision
97/603/EC  of  10  June  1997,  OJ  L  243,  5.9.1997,  p.  48;
Greece: 
2000,  Commission  Decision
97/607/EC  of  18  June  1997,  OJ  L  245,  9.9.1997,  p.  6).

31  December 

3.(cid:217)As  well  as  the  other  benefits  of  lower  costs  and
greater  choice  outlined  above,  the  liberalisation  will
bring  new  and  innovative  telecommunications  and
multimedia  companies  into  the  market.  They  will
come  with  many  new  ideas  for  services  and  will
stimulate  the  existing  operators  to  respond  with  their
own  ideas.  This  innovation  will  benefit  consumers  in
Europe,  by  providing  new  interactive  services,  and  it
telecommunications  and
will  help 
multimedia  industry  to  compete  more  effectively  on
world  markets,  so  creating  more  employment  oppor(cid:220)
tunities  and 
inno(cid:220)
vatory  development,  however,  will  not  come  about
unless  the  appropriate  conditions  of  competition
exist  with  respect  to  telecommunications  and  cable
networks  in  the  EU,  particularly  in  the  transition
period  to  full  competition  in  the  years  following
1  January  1998.

increasing  social  welfare.  This 

the  European 

the 

transition 

4.(cid:217)As  part  of  the  process  which  is  intended  to  ensure
towards
effective  provision 
for 
competitive  market  structures,  the  Commission  was
required  by  Directive  90/388/EEC  as  amended  by
Directive  95/51/EC  (the  Cable  Directive)  and  also
by  Directive  96/19/EC 
(the  Full  Competition
Directive)  to  review  two  particular  aspects  before  the
full  liberalisation  of  the  market  in  1998.  These  were:

-(cid:217)the  effects  on  competition  of  joint  provision  of
telecommunications  and  cable  TV  networks  by  a
single  operator,  and

-(cid:217)the  restrictions  on  the  provision  of  cable  TV
capacity  over  telecommunications  networks.

(ˇ)(cid:217)These 

issues  are  considered 

the
and
the 
convergence  of 
information  technology  sectors,  and  the 
implications  for
regulation,  COM(97)  623  final,  published  on  3  December
1997  ("the  Convergence  Green  Paper’).

telecommunications,  media 

in:  Green  Paper  on 

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5.(cid:217)This  communication  fulfils  the  Commission’s  obli(cid:220)
gations  under  that  review.  The  communication  is
based  on  two  reports  established  for  the  Commission
which  have  involved  substantial  research  and  wide(cid:220)
ranging  consultations  with  sector  participants.

regulatory  environment  which  again  constrains
market  development  over  time.  However,  given
that  technology  allowing  such  provision  is  just
emerging,  the  constraints  are  still  not  felt  heavily
in  most  Member  States  in  practice,

6.(cid:217)This  communication  addresses  these  competition  and
innovation  issues  only.  In  particular,  it  should  be
noted  that  with  regard  to  broadcasting  services,  this
communication  only  considers  the  transmission  of
signals,  principally  over  cable  and 
telecommuni(cid:220)
cations  networks,  and  does  not  address  issues  of  the
content  which  is  transmitted  over  those  networks.
The  Commission  recently  published  the  Green  Paper
on 
telecommunications,
media  and  information  technology  sectors,  and  the
implications  for  regulation(cid:216)(—)  which  covers  this  and
other  issues.

the  convergence  of 

the 

7.(cid:217)The  conclusions  of  the  review  can  be  summarised  as

follows:

infrastructure 

-(cid:217)developments  of  telecommunications  and  multi(cid:220)
media  markets  depend  on  four  factors:  service
competition, 
and
infrastructure  upgrade  as  well  as  other  types  of
innovation.  The  joint  provision  of  telecommuni(cid:220)
cations  and  cable  TV  networks  by 
former
monopolies  can  stifle  development  of  telecoms
and  multi(cid:220)media  applications,

competition 

-(cid:217)in  the  EU,  the  joint  provision,  inherited  from
monopoly  provision  in  the  past,  of  telecommuni(cid:220)
cations  and  cable  TV  networks  by  a  single
operator  could  in  certain  Member  States  allow
the  former  monopolies  to  delay  emergence  of
effective  competition.  This  could 
lead  to  an
asymmetric  starting  position  for  dominant  tele(cid:220)
communications  operators  compared  with  new
entrants,

-(cid:217)the  restrictions  on  the  provision  of  cable  TV
capacity  over  telecommunications  networks  are
also  significant  as  they  can  create  an  asymmetric

(—)(cid:217)See  Footnote  2  ("Convergence  Green  Paper’).

the 

See  also  the  communication  from  the  European  Commission
to  the  Council,  the  European  Parliament,  the  Economic  and
Social  Committee,  and  the  Committee  of  the  Regions  on
"Europe  at  the  forefront  of  the  global  information  society:
final,  28.11.1996,
rolling  action  plan’,  COM(96)  607 
paragraph  114.  Media  and  content  issues  are  also  addressed
in 
information
services:  cultural  matters’  and 
in  other  Commission
initiatives  such  as  the  Green  Paper  on  the  protection  of
minors  and  of  human  dignity 
in  audio(cid:220)visual  and
information  services,  COM(96)  483  final,  16.10.1996,  and
the  MEDIA  II  Programme,  which  aims  at  encouraging,
among  other  things,  the  competitiveness  of  the  European
audio(cid:220)visual  industry.

"Green  Paper  on  audio(cid:220)visual  and 

-(cid:217)the  accounting  separation  in  the  case  of  the  joint
provision  of  competing  networks  by  dominant
established  by
telecommunications  operators 
Commission  Directive  95/51/EC 
("the  Cable
Directive’)  has  been  shown  to  be  insufficient  to
in 
facilitate  pro(cid:220)competitive  development 
the
multi(cid:220)media 
should
steps 
sector.  Minimum 
include  the  effective  separation  of  these  operators
from  their  cable  TV  network  companies,  i.e.  the
operation  of  these  activities  in  clearly  separated
legal  entities.  Further  action  by  the  Commission
will  be  justified  with  regard  to  specific  cases  to
reduce 
the  anti(cid:220)competitive  effect  of  highly
dominant  positions  through  the  joint  provision
protected
previous 
inherited 
monopoly  positions.

legally 

from 

8.(cid:217)Finally,  the  principle  underlying  this  review  is  the
importance  of  competition  for  innovation.  Telecom(cid:220)
munications  and  multi(cid:220)media  can  become  vital
in  the  EU’s
drivers  of  growth  and  employment 
economies.  The  European  Union  must  ensure  that
the  starting  positions  into  these  new  markets  are
right  and  pro(cid:220)competitive 
to  draw
maximum  benefit  for  growth  and  creation  of  new
jobs  from  the  new  developments.

in  order 

1.(cid:217)HISTORY  AND  REASONS  FOR  CABLE  REVIEW

in  Europe 

services  and  equipment 

9.(cid:217)The  programme  to  complete  the  internal  market  in
telecoms 
is
designed  to  increase  innovation  and  the  range  of
services  available  to  consumers  in  particular  through
the  promotion  of  competition.  The  experience  in
countries  where 
liberalisation
had  been  carried  out  indicated  that  both  new  and
existing  operators  developed  more 
innovative
services  as  a  result  of  the  liberalisation,  to  the  benefit
of  consumers.

telecommunications 

10.(cid:217)On  18  October  1995,  the  Commission  adopted  the
Cable  Directive  which  required  Member  States  to

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7.3.98

allow  the  use  of  cable  TV  networks  for  the  provision
of  all  liberalised  telecommunications  services(cid:216)((cid:209)).

11.(cid:217)Specifically, 

in  relation  to  the  cable  review,  the

Cable  Directive  stated:

services(cid:216).(cid:216).(cid:216). 

"Where  a  single  operator  provides  both  networks  or
telecommunications
(i.e.  public 
both 
networks 
the
networks)(cid:216).(cid:216).(cid:216)., 
cable  TV 
Commission  shall,  before  1  January  1998,  carry  out
an  overall  assessment  of  the  impact  of  such  joint
provision  in  relation  to  the  aims  of  the  Directive.’

and 

12.(cid:217)On  13  March  1996,  the  Commission  adopted  the  full

Competition  Directive  which  noted  that:

some  Member  States 

"While  Directive  95/51/EC  of  18  October  1995
lifted  all  restrictions  with  regard  to  the  provision  of
liberalised  telecommunications  services  over  cable
television  networks, 
still
maintain  restrictions  on  the  use  of  public  telecom(cid:220)
munications  networks  for  the  provision  of  cable
television  capacity.  The  Commission  should  assess
the  situation  with  regard  to  such  restrictions  in  the
light  of  the  objectives  of  this  directive  once  the  tele(cid:220)
communications  markets  approach  full  liberalisation.’

The  Directive  also  stated  that:

"By  1  January  1998,  the  Commission  will  carry  out
an  overall  assessment  of  the  situation  with  regard  to
remaining  restrictions  on  the  use  of  public  telecom(cid:220)
munications  networks  for  the  provision  of  cable
television  capacity.’

13.(cid:217)The  review  before  1  January  1998  was  necessary
because  this  is  the  date  set  for  the  introduction  of
full  competition  on  the  provision  of  telecommuni(cid:220)
cations  infrastructures  and  services.  Effective  liberali(cid:220)
sation  of  telecommunications  infrastructure  is  indis(cid:220)
pensable 
this  context  as  acknowledged  by
Directive  96/19/EC,  to  avoid  new  entrants  being
limited 
in  their  freedom  to  provide  services  and
being  reliant  on  their  main  competitor  for  the
provision  of  transmission  capacity.

in 

14.(cid:217)Given  the  capital  intensive  nature  of  investment  in
new  networks,  existing  cable  TV  networks  are  a

((cid:209))(cid:217)See  footnote  1.

local 

infrastructure, 
provision 

crucial  element  in  the  effective  provision  of  alter(cid:220)
loop,  and  also
in  the 
native 
service 
telecommunications
for  new 
operators  in  the  newly  liberalised  markets  in  the
Member  States.  This  review  is  therefore  important
before  the 
implementation  of  full  competition  to
assess  the  effect  of  joint  ownership  of  such  networks
and  telecoms  networks.  This  is  because  local  loop
competition  is  an  essential  ingredient  for  the  creation
of  competitive  markets  and  the  reduction  of  market
power  of  the  dominant  carrier.

15.(cid:217)In  order  to  carry  out  the  review  the  Commission
commissioned  two  reports,  one  focusing  on  market
and  technological  developments,  the  other  providing
an  analysis  of  the 
legal  context(cid:216)((cid:210)).  The  market
report  had  the  following  overall  objective:

"To  examine  options  for  developing  competition  in
local  telephone  markets,  for  example,  via  cable
networks  competing  with  existing  local  loop  infra(cid:220)
structure.

To  understand  the  barriers  and  drivers  to  the  devel(cid:220)
opment  of  broadband  networks 
in  the  European
thus  encouraging  devel(cid:220)
Union  Member  States, 
opment  of  multimedia 
services  over  advanced
networks.’

16.(cid:217)The  reports  focused  on:

"The 
joint  ownership  of  telecommunications  and
cable  TV  networks  by  dominant  telecommunications
operators  (referred  to  as  joint  ownership)  addressed
in  the  cable  TV  Directive,  and

existing  restrictions  on  the  provision  of  cable  TV
capacity  on  public 
telecommunications  networks,
addressed  in  the  full  Competition  Directive.’

((cid:210))(cid:217)"Cable  Review  -  Study  on  the  competition  implications  in
telecommunications  and  multimedia  markets  of  (a) 
joint
provision  of  cable  and  telecoms  networks  by  a  single
dominant  operator  and  (b)  restrictions  on  the  use  of  tele(cid:220)
communications  networks 
the  provision  of  cable
for 
television  services,’  Arthur  D.  Little  International,  1997,  and
"Study  on  the  Scope  of  the  Legal  Instruments  under  EC
Competition  Law  available  to  the  European  Commission  to
implement  the  Results  of  the  ongoing  review  of  certain
in  the  telecommunications  and  cable  television
situations 
sectors,’  Coudert,  1997.  The  views  presented  in  the  reports
are  those  of  the  contractors  and  do  not  represent  or  commit
the  Commission  in  any  way.

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2.(cid:217)SUMMARY  OF  THE  REPORTS’  FINDINGS  ON  THE
CURRENT  SITUATION

17.(cid:217)According 

to 

for 

the 

reports  undertaken 

the
Commission,  Member  States’ 
telecommunications
and  multimedia  markets  are  not  developing  in  an
optimal  manner  at  present.  This 
from
evidence  gathered  on  the  four  drivers  of  optimal
in  the  market  report.  On
development 
each  of  these  drivers  (cid:134)  innovation,  service  provision,
network  competition  and  service  competition  (cid:134)
according  to  the  reports  it  is  clear  that  nearly  all  of
the  markets  for  telecommunications  and  multimedia
are  developing  in  a  suboptimal  manner.

identified 

is  clear 

2.1.(cid:217)Market  and  technology  overview

18.(cid:217)According  to  the  reports,  the  telecommunications
and  multimedia  service  offerings  in  most  Member
States  are  still  limited  compared  with  the  optimal
development  path.  Most  fundamentally,  telephone
density  in  Europe  is  generally  still  low  compared
with  that  in  the  US.  Only  Sweden  has  a  greater
telephone  density  than  the  US,  the  other  Member
States  are  below  with  the  EU  average  being  49  lines
per  100  inhabitants,  compared  with  62  for  the  US.
This  lower  penetration  in  telecommunications  lines  is
also  reflected  in  other  areas,  such  as  the  number  of
Internet  hosts  per  inhabitant,  where  only  Finland
exceeds  the  US  figure.  ISDN(cid:216)((cid:211))  penetration  remains
also  limited.

Fewer  than  half  (43(cid:216)%)  of  European  homes  are
connected  to  either  cable  or  satellite  television  (for
the  European  cable  TV  networks  in  particular  see
overview  in  Annex  1).

cable 

companies 

19.(cid:217)Cable  competition  is  developing  in  the  USA,  Canada
and  Australia. 
in
Incumbent 
America  have  been  forced  to  respond  to  competition
by  cutting  prices  by  50(cid:216)%  and  in  one  case  over
90(cid:216)%,  offer  free  pay  per  view  events  and  upgrading
their  systems.  Other  companies  have  added  more
programmes 
In
Australia,  new  competing  cable  operators  are
planning  to  widen  the  services  they  will  offer  in
comparison  with 
to
generate  additional  revenue.

their  basic  cable  package. 

incumbent  operators 

the 

to 

20.(cid:217)In  the  European  Union,  by  contrast,  the  reports
suggest  that  as  many  as  59(cid:216)%  of  cable  customers

loop 

local 

are  served  by  a  cable  operator  which  is  wholly  or
partly  owned  by 
telecommunications
the  main 
provider.  Far  from  there  being  competition  in  the
local 
in  these  circumstances,  therefore,  one
company  controls  two  points  of  entry  into  these
homes.  Effective 
loop  competition  currently
only  takes  place  in  three  Member  States:  the  UK,
Finland  and  Sweden.  In  the  UK,  BT’s  market
position  has  been  retained  at  a  high  level  partly
because  of  its  continuing  strength  in  the  local  loop.
In  Finland  by  contrast,  a  large  market  share  was
obtained  by  the  new  entrants  in  a  very  short  space  of
time  because  many  of  the  companies  already  had  a
presence  in  local  telephone  markets.

increased 

the  development  of 

21.(cid:217)Exploitation  of  technological  advances  is  essential
for 
telecommuni(cid:220)
cations  and  multimedia  services.  Currently  such
technological  advances 
terrestrial
television,  digital  satellite  DTH(cid:216)((cid:212))  television,  cable
telephony  services  and  multichannel  television  over
broadband  cable  television  networks,  and,  in  the
future,  broadband  Internet  provision  over  fixed,
wireless  and  satellite  networks.

include:  digital 

2.2.(cid:217)Key  issues

22.(cid:217)The  four  key  issues  identified  in  the  reports  for  the
optimal  development  of  the  new  telecommunications
and  multi(cid:220)media  technologies  are:

-(cid:217)the  range  of  services:  upgraded  cable  TV  and
PSTN(cid:216)((cid:213))  access  technologies  have  the  potential
to  offer  the  widest  range  of  telecommunications
and  multi(cid:220)media  services,  including  multichannel
TV,  voice  telephony,  and  high(cid:220)speed  Internet
access.  While  telephony  services  will  be  available
from  a  range  of  alternative  wireline  and  wireless
networks,  such  as  power  lines  and  WLL(cid:216)((cid:214)),  these
technologies  are  unlikely  in  the  short  to  medium
term  to  have  the  capacity  to  deliver  the  full  range
of  audio(cid:220)visual  services.  The  lack  of  an  inherent
return  path  will  prevent  other  technologies  that
are  well  suited  to  the  delivery  of  broadcasting
multichannel  TV  and  multimedia  services  from
providing  a  full  range  of  interactive  and  two(cid:220)way
services,

((cid:211))(cid:217)Integrated  Services  Digital  Network.

((cid:212))(cid:217)Direct(cid:220)to(cid:220)Home.
((cid:213))(cid:217)Public  Switched  Telephone  Network.
((cid:214))(cid:217)Wireless  local  loop.

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-(cid:217)the  level  of  service  innovation:  both  cable  TV
and 
the
telecommunications  networks  have 
technical  capabilities  to  foster  the  conception,
development,  and  realisation  of  the  widest  range
of  innovative  telecommunications  and  multimedia
services:  for  example,  switched  video  services,
broadcast  services,  pointcast  services,  and  high
speed  data  services.  In  contrast  the  development
innovative  services  over  alternative  access
of 
technologies  will  be 
for
example,  lack  of  upstream  capacity  or  bandwidth
per  user,

limited,  owing 

to, 

-(cid:217)infrastructure 

technological 

limitations:  every 

infrastructure  has 

telecommuni(cid:220)
cations 
limi(cid:220)
tations  on  the  range  of  services  that  can  be
offered.  Both  cable  TV  and  PSTN  access  tech(cid:220)
nologies  can  be  upgraded  to  overcome  most  of
these  limitations  and  provide  a  suitable  platform
for  the  development  of  the  telecommunications
and  multi(cid:220)media  sector.  The  bandwidth  can  be
upgraded  by  replacing  with  broadband  fibre
optics.  Bi(cid:220)directional  amplifiers  and  switching
fabrics  can  be 
installed  to  provide  switching
capabilities.  Digitalisation  will  greatly  enhance
the  quality  and  variety  of  services  of  both
wireline  and  wireless  technologies.  By  contrast,
the  upgrading  of  many  wireless  technologies,
such  as  wireless  local  loop  and  DTH  satellite,
limited  by  technical  or  environmental
will  be 
restraints,

-(cid:217)infrastructure  competition:  cable  TV  and  PSTN
systems  can  be  equal  competitors  in  the  local
loop  for  the  provision  of  all  telecommunications
and  multi(cid:220)media  services.  In  the  medium  term,
there  will  be  competition  from  digital  satellite
and  wireless 
the
provision  of  television  and  telephony  services
respectively.  However,  cable  TV  and  PSTN
systems  are  in  place  today  and  will  accelerate
competition  in  the  local  loop  substantially.

loop  operators 

local 

for 

communications  operators  own  or  control  cable  TV
networks.

2.3.(cid:217)Options  assessed

24.(cid:217)Given  this  situation,  the  reports  assessed  a  broad
range  of  actions.  As  regards  joint  ownership  of  cable
TV  and  telecommunications  network,  the  market
report  examined  the  following  main  options:

-(cid:217)maintain  joint  ownership  without  other  changes,

-(cid:217)legal 

separation 

(creation  of  100(cid:216)% 

cable

subsidiary),

-(cid:217)no  joint  ownership.

25.(cid:217)As  regards  the  restrictions  on  the  provision  by  tele(cid:220)
communications  operators  of  cable  TV  capacity  over
telecommunications  networks  the  following  options
were  examined:

-(cid:217)maintain  status  quo,

-(cid:217)lift  restrictions  on  specific  PTOs  and/or  give
dominant  PTOs  rights  to  provide  cable  TV
capacity  via  telecommunications  infrastructure,

-(cid:217)lift  restrictions  on  licences  for  cable  TV  infra(cid:220)

structure.

26.(cid:217)In  a  graduated  approach,  the  report  also  assessed  a
number  of  intermediate  and  transitional  options(cid:216)(˛˝).
The  details  are  set  out  in  Annex  2.  The  reports  are
available  on  request.

23.(cid:217)In  summary,  the  two  wireline  technologies  -  tele(cid:220)
communications  and  cable  TV  networks  -  are  at
this  stage  the  only  ones  which  can  promote  optimal
development  according  to  all  four  criteria:  choice  of
services,  service  innovation,  removal  of  infrastructure
limitations  and  the  encouragement  of  infrastructure
competition.  The 
technologies
currently  available  still  have  limitations  of  one  or
more  of  the  criteria  which  makes  them  less  suitable
for  the  optimal  development  of  multimedia  services.
Nevertheless,  in  most  Member  States,  dominant  tele(cid:220)

other  wireless 

(˛˝)(cid:217)The  Report  also  assessed  the  following  options:

-(cid:217)maintain  joint  ownership/accelerate  DTH  development

towards  digital  multichannel  services,

-(cid:217)maintain  joint  ownership  but  establish  ONP  on  joint

owner’s  cable  network,

-(cid:217)maintain  joint  ownership  but  open  up  spectrum  for

wireless  local  loop  (narrowband),

-(cid:217)legal  separation  and  management  separation,
-(cid:217)partial  joint  ownership,
-(cid:217)independent  trustee,
-(cid:217)separation  of  network  and  services.
See  Annex  2.

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27.(cid:217)The  reports  found  that  an  optimal  result  would  be
achieved  only  by  a  full(cid:220)scale  divestiture,  in  cases
where  the  dominant  telecommunications  operator
also  has  a  determining  ownership  interest  in  the
cable  TV  infrastructure,  as  joint  ownership  acts  as  a
severe  deterrent  to  the  emergence  of  new  and  inno(cid:220)
vative  services  and  to  potential  new  entrants  into  the
market, 
effective
implementation  of  full  liberalisation  by  1  January
1998.  The  reports  concluded  that  a  divestiture  could
be  required  under  competition  rules 
in  certain
circumstances.

undermine 

could 

and 

the 

opment  of  the  telecommunications  and  multimedia
markets  in  the  Member  States  in  four  main  ways.
These  are:

-(cid:217)delaying  the  upgrading  of  cable  networks  to  have

bi(cid:220)directional  capability,

-(cid:217)blocking  the  development  of  competing  infra(cid:220)

structures,

As  regards  the  restrictions  on  telecommunications
operators  to  provide  cable  TV  capacity  over  tele(cid:220)
communications  networks  the  reports  conclude  that
such  restrictions  should  be  lifted,  depending  on  the
overall  impact  of  such  a  measure  as  regards  the
competitive  situation  in  the  local  loop.

-(cid:217)limiting  service  competition,  and

-(cid:217)constraining  innovation.

3.(cid:217)MORE  DETAILED  ANALYSIS  OF  JOINT  PROVISION
AND  OF  RESTRICTIONS  FOR  THE
PROVISION  OF  CABLE  TV  CAPACITY

28.(cid:217)In  this  section,  more  details  are  given,  drawing  on
parts  of  the  reports,  on  the  focus  of  the  review:  the
impact  of  joint  provision  and  the  restrictions  on
providing  cable  TV  capacity.

3.1.(cid:217)Impact  of  allowing  continued  joint  provision  of  cable
TV  capacity  by  telecommunications  organisations,
when  abolishing  their  exclusive  rights

29.(cid:217)It  seems  clear  from  the  analysis  that  the  current
position  with  regard 
the
to 
European  Union  is  not  optimal  in  the  telecommuni(cid:220)
cations  and  multi(cid:220)media  sectors(cid:216)(˛˛).

innovation 

the 

in 

30.(cid:217)Joint 

ownership 

telecommunications
networks  and  cable  TV  networks  limits  the  devel(cid:220)

both 

of 

(˛˛)(cid:217)It  should  be  noted  that  problems  related  to  audio(cid:220)visual  and
content  provision  and  the  position  of  public  service  broad(cid:220)
casters  are  not  dealt  with  in  this  communication.  More
general  regulatory  and  audio(cid:220)visual  matters  are  addressed
by  the  Commission  in  the  Convergence  Green  Paper  (see
footnote  2).
This  communication  addresses 
structure  issues  relating  to  infrastructure  provision.

innovation  and  market

31.(cid:217)Joint  operators  have  no  incentive  to  upgrade  their
cable  TV  networks  to  full  bi(cid:220)directional  capacity.
This  is  because  there  is  no  intrinsic  financial  benefit
in  upgrading  a  cable  TV  network  which  will  then
compete  for  customers  with  the  core  telecommuni(cid:220)
cations  business  of  the  telecommunications  network
operator.  This  competition  will  take  place  not  only
for  telephony  services,  but  also  for  more  advanced
multimedia  services  such  as  Internet  access  and  in
the  future  services  such  as  video  on  demand.  The
investment  in  the  cable  television  network  is  seen  as
unlikely  to  generate  a  net  additional  revenue  for  the
joint  owner.

32.(cid:217)In  addition,  in  many  circumstances,  the  joint  owner
is  unlikely  to  focus  on  the  development  of  the  cable
television  business  as  it  represents  a  small  proportion
of  the  total  revenue  of  the  telecommunications  and
cable  businesses  combined.  On  average  across  the
EU,  less  than  10(cid:216)%  of  revenue  comes  from  cable.
Therefore  a  jointly  owned  cable  television  company
may  not  receive  the  management  attention  necessary
to  invest  in  the  development  of  the  system.

33.(cid:217)Independent  cable  network  operators,  by  contrast,
do  not  face  the  investment  disadvantage  which  the
joint  owner  has.  Upgrading  an  existing  cable
network  to  provide  bi(cid:220)directional  capacity  costs  less
than  building  a  new  telecommunications  network
from  scratch.  However,  the  revenue  benefits  for  the
television  provider  are  pure
independent  cable 
benefits  and  do  not 
from  other
activities  as  is  the  case  with  the  joint  owner.  Indeed,
the  development  of  telecommunications  services  is
likely  to  attract  entirely  new  customers  to  the  inde(cid:220)
pendent  cable  television  provider,  and  not  customers
transferring  from  another  business.

take  revenue 

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the 

(primarily 

34.(cid:217)Joint  ownership  also  has  a  profound  effect  on  both
infrastructure  and  service  competition.  This  effect
takes  place  in  several  ways.  First,  the  joint  ownership
does  not  give  competitors  to  the  dominant  operator
an  alternative  access  to  the  local  loop.  This  has
proved  vital  in  the  development  of  competition  in
telecommunications  in  the  UK,  where  the  arrival  of
the  cable  companies  led  to  the  reduction  in  the
dominant  operator’s  market  share  far  quicker  than
the  previous 
service  competitor
Mercury)  challenger  to  BT  had  done.  To  maintain
joint  ownership  will  deny  consumers 
in  other
markets  the  access  to  alternative  service  providers  for
broadband  multimedia  services.  Second,  the  absence
of  local  loop  competition  means  that  long  distance
competition 
curtailed.  Long  distance
operators  can  operate  by  taking  traffic  from  the
incumbent  directly  through  the 
local
loop.  However,  long  distance  competition  has  been
far  stronger  when  customers  can  be  found  from
other  challengers  to  the  dominant  operator  at  a  local
level.  Again,  experience  in  the  UK  demonstrates  that
this  is  the  case.  Thirdly,  joint  owenrship  can  prevent
or  delay  the  introduction  of  broadband  interactive
services.  According  to  the  analysis  undertaken,  joint
owners  appear  to  be  reluctant  to  link  the  broadband
cable  network  with  the  PSTN  network  in  order  to
interactivity  for  the  development  of
provide  true 
interactive  services,  such  as  high  speed  Internet
access.  Finally,  service  providers  face  problems  if
there  is  not  a  choice  of  infrastructure  providers  over
which  to  offer  their  services  because  of  the  reliance
on  a  single  provider.

incumbent’s 

also 

is 

pro(cid:220)competitive  effects  of  liberalisation,  as  Europe
moves  into  the  multi(cid:220)media  age(cid:216)(˛ˇ).

3.2.(cid:217)Impact  of  restrictions  to  provide  cable  TV  trans(cid:220)

mission  capacity

to 

that 

ensure 

is  no 

37.(cid:217)Restrictions  on  telecoms  companies  to  provide  cable
TV 
the
transmission  capacity  may  discourage 
building  of  broadband  networks  in  other  ways.  The
Cable  Directive  ensures  that  all  cable  TV  networks
are  free  to  provide  all  liberalised  telecommunications
corresponding
there 
services.  However, 
provision 
telecommunications
operators  are  allowed  to  offer  cable  TV  capacity
over  their  public  telecommunications  networks.  The
ability  of  telecommunications  operators  to  develop
further  their  public  telecommunications  networks  in
this  respect  may  depend  on  national  regulations.
Even  in  cases  of  joint  ownership  where  telecom(cid:220)
munications  companies  do  make  available  cable  TV
capacity,  this  can  lead  to  restrictions  on  technical
progress,  given  that  new  technologies  for  upgrading
telecommunications  networks  exist  and  also  given
the  far  higher  penetration  of  telecommunications
networks  compared  with  cable  TV  networks  in  most
Member  States.

35.(cid:217)Service 

operator 

innovation 

telecommunications 

joint
is  also  hindered  by 
from
ownership.  Experience  of  cable  operators 
several  Member  States 
indicates  that  when  those
operators  wish  to  develop  innovative  services  the
often
dominant 
restricts  the  development  of  the  innovative  services.
This  restriction  arises  because  of  the  cable  operators’
dependence  for  many  elements  on  the  dominant  tele(cid:220)
communications  operator.  Even  if  they  are  willing  to
develop  the  services,  the  costs  which  it  wishes  to
impose  on  the  other  cable  operators  will  often  make
the  venture  non(cid:220)viable  for  those  companies.  Where
the  dominant  telecommunications  operator  is  a  joint
owner  of  the  cable  operator,  its  role  in  the  devel(cid:220)
opment  of  new  services  is  even  more  important  for
the  success  of  the  venture.  Without  the  involvement
of  the  joint  owner,  the  critical  mass  is  not  available
to  kick  start  the  new  services.

38.(cid:217)The  technology  underpinning  the  different  types  of
telecommunications  networks  is  steadily  converging.
For  telecommunications  networks,  technologies  such
as  ADSL(cid:216)(˛—)  are  providing  an  opportunity  for  tele(cid:220)
communications  networks  to  carry  broadcast  signals.
Combined  with  compression  techniques,  telecom(cid:220)
munications  operators  will  be  able  to  transmit  high
bandwidth  signals  down  the  existing  copper  pair
telephone  line.  This  could  amount  to  between  one
and  six  television  channels.  This  will  enable  telecom(cid:220)
munications  companies  to  contemplate  competing
with  cable  companies,  for  the  provision  of  television
channels  and,  more 
likely  by  offering  video  on
demand  services  which  would  compete  with  cable
television  companies  pay  per  view  services,  as  well  as
high(cid:220)speed  Internet  access.

36.(cid:217)The  result  is  that  joint  ownership  of  telecommuni(cid:220)
cations  and  cable  networks 
situation  of
dominance  is  likely  to  be  the  single  most  important
factor  holding  back  market  development  and  the

in  a 

(˛ˇ)(cid:217)Currently 

the  public  Telecommunications  Organisations
have  a  strong  cable  presence  in  ten  Member  States:  they
plan  such  presence  in  two  Member  States:  they  are  not
present  at  this  stage  in  three  Member  States.

(˛—)(cid:217)Asymmetrical  Digital  Subscriber  Line.  For  details  see  Arthur

D.  Little  study  (footnote  5).

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39.(cid:217)The  removal  of  such  restrictions  in  the  context  of
telecommuni(cid:220)
the
for  by 

the  European 
therefore  called 

the 
liberalisation  of 
cations  sector  was 
European  Parliament(cid:216)(˛(cid:209)).

4.(cid:217)MEMBER  STATE  REGULATION

40.(cid:217)Member  States  are  now  in  the  process  of  completing
the  implementation  of  the  Directive  96/19/EC  with
a  view  to  introducing  full  competition  by  1  January
1998(cid:216)(˛(cid:210)).  Except  in  one  member  state,  national  legis(cid:220)
lation  aiming  at  the  abolition  of  special  and  exclusive
framework  contains  no
this 
rights  adopted 
measures  to  address  the  issue  of  joint  ownership.

in 

41.(cid:217)Different  levels  of  regulation  continue  to  be  applied
to  cable  network  operators.  Most  Member  States
give  licences  to  cable  TV  operators  at  a  local  level,
often  under  exclusive  or  special  rights.  The  possi(cid:220)
bility  for  owning 
infrastructure  also  varies  from
country  to  country  as  do  the  restrictions  on  the
ability  for  the  dominant  operators  to  provide  cable
TV  services  over  telecommunications  networks.

42.(cid:217)Although  one  member 

state 

imposes 

limitations
which  affect  the  size  of  the  shareholding  which  the
telecommunications  operator  can  hold  in  cable  TV
company  authorised  as  a  telecoms  network  operator,
the  joint  provision  of  telecommunications  and  cable
TV  networks  by  a  single  operator  remains  permitted
in  all  Member  States(cid:216)(˛(cid:211)).  A  number  of  Member
States  rely  on  general  competition  law  to  regulate
the  actions  of  the  joint  provider.

(˛(cid:209))(cid:217)EP  Resolution  of  15  JUne  1995  (OJ  C  166,  3.7.1995,  p.
109)  and  EP  Resolution  of  19  May  1995  (OJ  C  151,
19.6.1995,  p.  479).

(˛(cid:210))(cid:217)Communication  to  the  Council,  the  European  Parliament,
the  Economic  and  Social  Committee  and  the  Committee  of
the  Regions  on  the  implementation  of  the  telecommuni(cid:220)
cations  regulatory  package:  first  update  (COM(97)  504).
(˛(cid:211))(cid:217)In  Spain  the  dominant  operator  Telef(cid:246)nica  is  required  to
wait  before  beginning  as  a  cable  TV  network  provider  in  a
new  franchise  area.  This  restriction  lasts  between  16  months
and  two  years.  IN  the  UK,  BT,  the  dominant  operator.
Mercury  and  Kingston  Communications  can  operate  cable
TV  networks  if  they  obtain  a  franchise.  However,  they  have
to  be  run  separately  from  the  main  telecommunications
business.
In  a  number  of  other  Member  States  no  explicit  restrictions
are  foreseen  but  the  situation 
is  undefined.  It  can  be
expected  that  problems  will  arise  as  the  new  technologies
are  applied.  According  to  the  reports,  the  Commission
considers  that  the  situation  in  ten  Member  States  falls  into
this  category.

43.(cid:217)As  regards  the  provision  of  cable  TV  capacity  over
telecommunications  networks,  two  Member  States
have  imposed  explicit  restrictions  on  their  telecom(cid:220)
munications  organisations.  Other  Member  States
have  no  national  restrictions,  but  the  telecommuni(cid:220)
cations  operator  still  does  not  carry  cable  TV
capacity  for  a  variety  of  reasons  connected  with  the
local  regulatory  environment.  In  the  longer  term,  the
restrictions,  mentioned  in  the  first  sentence,  prevent
telecommunications  companies  from  offering  cable
TV  capacity,  which  is  likely  to  restrict  infrastructure
competition  and  multimedia  and  therefore  means
that  the  development  of  telecommunications  and
multimedia  markets  in  the  EU  will  proceed  in  a
sub(cid:220)optimal  manner(cid:216)(˛(cid:212)).  These  restrictions  therefore
should  not  be  regarded  as  a  permanent  fixture  and
should  be  lifted  according  to  a  given  and  transparent
timescale  across  the  EU  as  effective  competition
develops  in  the  local  loop.  That  timescale  should  be
capable  of  some  flexibility,  to  take  account  of
national  circumstances.

in 

its 

44.(cid:217)The  finding  therefore  is  that,  as  market  development
infancy  as  regards  the  carriage  of
telecommunications
largely
is 

is  still 
television  capacity  via  public 
networks, 
undefined.

regulatory 

situation 

the 

45.(cid:217)The  restraints  on  further  development  of  cable  TV
capacity  through  the  development  of  new  techno(cid:220)
logies,  either  by  further  development  of  the  public
telecommunications  networks  (e.g.  via  ADSL)  or  the
allocation  of  new 
for  new  broadband
licences 
wireless  technologies  could  become  a  major  brake
on  market  development  towards  multi(cid:220)media  in  the
near  future.

5.(cid:217)ASSESSMENT  AND  ACTION  UNDER  COMPETITION
RULES

comply  with 

46.(cid:217)The  Treaty,  and  in  particular  its  Article  90,  entrusts
the  Commission  with  the  task  of  ensuring  that
Member  States,  in  the  case  of  public  undertakings
special  or  exclusive
and  undertakings  enjoying 
under
rights, 
Community 
the
law.  Under  Article 
Commission  can,  on  the  one  hand,  specify  and
clarify  the  obligations  arising  from  this  Article,  and,
on  the  other  hand,  set  out  obligations  for  the
Member  States  which  are  necessary  to  allow  the
Commission 
the  duty  of
to  perform  effectively 
surveillance  imposed  upon  it  by  that  paragraph.

their  obligations 

90(3) 

(˛(cid:212))(cid:217)This  is  reflected  in  the  UK,  where  the  restrictions  on  BT

and  the  other  PTO’s  are  time  limited.

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47.(cid:217)The  Commission  must  in  particular  ensure  that,  even
while  abolishing  these  rights,  Member  States  shall
not  enforce  measures  which  would  not  allow  the
dominant  position  of 
telecommunications  organi(cid:220)
sations  being  challenged  by  competition  once  the
liberalisation  of  voice  telephony  takes  place,  making
it  thus  possible  for  these  telecommunications  organi(cid:220)
sations  to  maintain  their  dominant  position  in  voice
telephony  and  public  telecommunications  network
markets  and  thereby  strengthening  the  dominant
position  of  the  incumbent  operator.

5.1.(cid:217)Horizontal  action

5.1.1.(cid:217)Joint  Ownership

48.(cid:217)As  regards 

joint  ownership,  Directive  95/51/EC
("the  Cable  Directive’)  has  established  the  principle
of  accounting  separation  and  has  indicated  a  pref(cid:220)
erence  for  structural  separation, 
i.e.  operation  of
telecommunications  and  cable  TV  networks  by  those
operators  in  clearly  distinct  legal  entities(cid:216)(˛(cid:213)).

49.(cid:217)Article  2  of  the  Directive  requires  that  Member

States:

-(cid:217)ensure  accounting 

transparency  and  prevent
discriminatory  behaviour,  where  a  telecommuni(cid:220)
to
cations  operator  with  an  exclusive  right 
provide 
network
infrastructure  also  provides  cable  TV  network
infrastructure,

telecommunications 

public 

-(cid:217)ensure  that  an  operator  with  an  exclusive  right  to
provide  cable  TV  network  infrastructure  in  a
given  area  in  a  Member  State  keeps  separate
financial  accounts  regarding  its  activity  as  a  tele(cid:220)
communications  network  capacity  provider  when
its  turnover  exceeds  a  certain  level.

50.(cid:217)While  the  Cable  Directive 

impact  of  such 

left  the  decision  on
accounting  separation  versus  a  full(cid:220)scale  structural
separation  to  the  Member  States,  it  also  stated  that
joint
the  current  review  of  the 
provision  in  relation  to  the  aims  of  the  Directive
would  be  made.  The  Directive  stated 
the
Commission  would  reconsider 
"whether  the  sepa(cid:220)
ration  of  accounts  is  sufficient  to  avoid  improper
practices’  and  would 
joint
provision  does  not  result 
limitation  of  the
potential  supply  of  transmission  capacity  at  the
expense  of  the  services  providers  in  the  relevant  area,
or  whether  further  measures  are  warranted’  (recital
20),  where  in  the  meantime  no  competing  home
delivery  systems  were  authorised  by  the  relevant
Member  States.

"assess  whether  such 

in  a 

that 

51.(cid:217)Even 

the
though  under  Directive  96/19/EC, 
majority  of  the  Member  States  have  the  legal  obli(cid:220)
gation  to  abolish  exclusive  or  special  rights  by  1
January  1998  on  telecomunications  networks, 
in
none  of  them  will  effective  competition  in  the  local
loop  be  established  at  a  national 
level  before  a
substantial  transition  period.  As  regards  the  joint
ownership 
cable
networks,  only  a  few  Member  States  have  estab(cid:220)
lished  structural  separation(cid:216)(˛(cid:214)).

telecommunications 

and 

of 

-(cid:217)ensure  the  separation  of  financial  accounts  as
concerns  the  provision  of  each  network  and  the
as
activity 
telecommunications 
provider  of  telecommunications  services,  and

operator’s 

52.(cid:217)While  accounting  separation  and  implementation  of
can  help

cost  allocation  methods 

appropriate 

(˛(cid:213))(cid:217)The  Cable  Directive  stipulates  in  its  recital  18  in  particular:
"Where  Member  States  grant  to  the  same  undertaking  the
right  to  establish  both  cable  TV  and  telecommunications
networks,  they  put  the  undertaking  in  a  situation  whereby  it
has  no  incentive  to  attract  users  to  the  network  best  suited
to  the  provision  of  the  relevant  service,  as  long  as  it  has
spare  capacity  on  the  other  network.  In  that  case,  the
undertaking  has,  on  the  contrary,  an  interest  for  over(cid:220)
charging  for  use  of 
the
the  Cable 
provision  of  non(cid:220)reserved  services,  in  order  to  increase  the
traffic  on  their  telecommunications  networks.  .(cid:216).(cid:216).  To  allow
the  monitoring  of  any  improper  behaviour,  Member  States
should  therefore  at 
impose  a  clear  separation  of
financial  records  between  the  two  activities,  though  full
structural  separation  is  preferable.’

infrastructure  for 

least 

(˛(cid:214))(cid:217)E.g.  the  Netherlands  have  taken  a  number  of  steps  to
ensure  a  limitation  of  cross(cid:220)ownership  by  the  incumbent
telecommunications  organisation  over  both  telecommuni(cid:220)
cations  and  cable  TV  infrastructure  as  well  as  to  introduce
a  form  of  structural  separation  between  those  two  activities:
inter  alia,  specific  obligations  were  developed  to  ensure  that
there  would  be  no  influence  by  the  incumbent  telecom(cid:220)
munications  organisation  on  the  commercial  behaviour  of
the  cable  TV  operator  and  specific  Chinese  Walls  needed  to
be  put  in  place  in  order  to  ensure  that  there  would  be  no
direct  or 
sensitive
information  between 
telecommunications
organisation  and  the  cable  TV  operator.  In  Germany,
Deutsche  Telekom  have  recently  announced  that  their  cable
TV  networks  will  be  put  into  a  separate  company  from  the
core  telecommunications  business.

indirect  exchange  of  commercially 

incumbent 

the 

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in  verifying  and  avoiding  a  number  of  possibly
abusive  practices  by  the  dominant  undertaking,  the
beneficial  effects  of  such  rules  remain  largely  limited
to  princing  practices.  However,  as  was  anticipated  in
the  Cable  Directive  the  position  of  the  dominant
undertaking  may  also  give  rise  to  more  fundamental
concerns  which  go  back  to  the  essential  "conflict  of
interest’  which  is  inherent  in  that  position  due  to  the
control  over  both  the  telecommunications  and  cable
TV  infrastructure.

53.(cid:217)The  mere  separation  of  accounts  will  only  render
financial  flows  more  transparent,  whereas  legal  sepa(cid:220)
ration  will  lead  to  more  transparency  of  assets  and
costs  and  will  facilitate  monitoring  of  the  profit(cid:220)
ability  and  the  management  of  the  cable  network
operations.  The  provision  of 
telecommunications
networks  and  cable  TV  networks  are  related
activities.  Therefore  the  position  of  an  operator  on
one  of  these  markets  has  an  impact  on  its  position
on  the  other,  and  the  supervision  of  its  activities  on
these  markets  is  more  difficult.

54.(cid:217)Also,  the  future  financial  prospects  of  a  cable  TV
network  which  has  not  yet  been  built  are  uncertain
for  a  company  that  is  not  yet  already  established  on
the  telecommunications  or  pay  TV  services  markets.
Therefore,  it  is  essential  that  a  dominant  telecom(cid:220)
munications  organisation  organises  its  own  cable  TV
network  activities  in  a  way  that  can  be  monitored  in
order  to  exclude  that  it  uses  its  resources  to  abuse  its
position,  for  example  so  that  it  does  not  discriminate
against  new  entrant  cable  TV  networks  for  intercon(cid:220)
nection  rates  for  telephony  as  opposed  to  the  rates
for  its  own  cable  TV  network.

large  potential  for  abusive  conduct  and  foreclosure
effects  exists.  Accounting  separation  is  an  insufficient
measure  in  this  context.

technological  progress 

56.(cid:217)The  review  of  the  Commission  therefore  considers  it
necessary,  as  a  minimum  measure,  that  legal  sepa(cid:220)
ration  is  implemented.  In  order  to  be  able  to  ensure
to  monitor
rapid 
effectively  behaviour  which  could  be  abusive, 
it
therefore  will  submit  an  amendment  to  Directive
90/388/EC  which  will  establish  this  requirement  to
enable  fully  competitive  structures  in  the  telecom(cid:220)
munications  and  cable  TV  network  markets.

and 

57.(cid:217)In  addition,  Member  States  might  have  to  take
specific  action  to  avoid  that  in  the  local  telephony
markets  the  operator  of  both  networks  is  the  only
infrastructure  provider  for  its  competitors(cid:216)(ˇ˝)  taking
into  account 
the
relevant  local  telephony  markets  where  duplication
of  infrastructure  is  slow  and  expensive.

specific  circumstances  of 

the 

5.1.2.(cid:217)Restriction  on  the  provision  of  cable  TV  capacity

the 

public 

telecommunications 

58.(cid:217)The  restriction  on  telecommunications  operators  to
provide  cable  TV  capacity  over  their  public  telecom(cid:220)
munications  networks  can  lead  to  a  situation  where
providers  of  cable  TV  services  are  prevented  from
using 
network
capacity  of  the  telecommunications  organisation  for
cable  TV  services.  The  exclusion  of  the  use  of  the
public 
the
scarcity  of  cable  TV  transmission  available  capacity.
The  restrictions  on 
the  available  capacity  have
particularly  severe  effects  on  providers  of  cable  TV
from  other  Member  States  as  the  allocation  of
capacity  available  on  cable  networks  is  based  on  the
media  laws  of  the  Member  States  which  usually  give
or  have  given  preference  to  national  providers.

telecommunications  network 

increases 

implies 

that  changes 

55.(cid:217)In  applying  the  competition  rules  to  specific  facts  it
is  essential  to  take  due  account  of  the  legal  and
economic  context.  This 
in
market  circumstances,  such  as  technological  or  other
developments  have  a  direct  impact  on  the  analysis
under  competition  law.  At  the  eve  of  convergence
and  the  emergence  of  new  multi(cid:220)media  markets,
cross(cid:220)ownership  between 
telecommunications  and
cable  networks  has  a  much  higher  potential  impact
as  regards  market  power  and  potential  of  abuse.  The
commercial  conduct  of  the  enterprises  concerned
will  therefore  require  an  increased  scrutiny  since  a

(ˇ˝)(cid:217)The  measure  to  be  taken  in  respect  of  specific  cases  could
include  the  splitting(cid:220)up  of  the  entity  operating  cable  TV
networks  into  several  regional  entities,  the  opening  of  the
cable  operator  to  a  participation  of  third  parties,  or  the
requirement  to  fully  sell(cid:220)off  this  entity.
For  example,  a  requirement  to  sell(cid:220)off  wholly  or  partly  its
ownership 
in  the  entity  or  entities  operating  cable  TV
networks  could  be  implemented  through  the  appointment  of
a  trustee  with  an  irrevocable  mandate  to  sell  the  entity  and
to  set  up  a  management  structure  for  the  time  period
required  to  implement  a  divestiture.

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59.(cid:217)The  measures  restricting  the  use  of  telecommuni(cid:220)
cations  networks  for  the  provision  of  cable  television
capacity  could  therefore  be  in  breach  of  Article  90,
in  conjunction  with  Article  59  of  the  Treaty.  Even  in
cases  where  restrictions  apply  without  distinction  to
all  companies  other  than  the  relevant  cable  TV
network  operators,  Article  59  might  be  applicable.  It
is  not  necessary  for  all  the  companies  of  a  Member
in  relation  to  the  foreign
State  to  be  favoured 
the  preferential
companies.  It 
treatment 
national
benefit 
operators(cid:216)(ˇ˛)  if  these  measures  prevent  telecommuni(cid:220)
cations  organisations  from  upgrading  their  telecom(cid:220)
munications  networks  to  full  multimedia  capabilities
they  could  also  be 
in
conjunction  with  Article  86(b)  of  the  Treaty.

in  breach  of  Article  90, 

is  sufficient 

certain 

should 

that 

technologies, 

cable  TV  capacity,  in  particular  for  new  market
developments  and 
the  commercial
provision  of  new  broadband  transmission  capacity  is
future,  wireless
of  utmost 
importance. 
technically
broadband  applications  will  become 
feasible  and  commercially  viable.

the 

In 

63.(cid:217)According 

to 

to  grant 

the  Full  Competition  Directive
(96/19/EC)  Member  States  have  an  obligation  not
such  wireless
to 
refuse 
broadband 
necessary
frequencies  are  available.  Given  the  importance  of
this  issue,  the  Commission  will  monitor  closely  the
granting  of  radio  frequency 
licences  by  Member
States  and  will  take  action  if  necessary.

applications  where 

licences 

the 

for 

60.(cid:217)Even  though  these  measures 

services, 

limited  the  techno(cid:220)
logical  development  of  the  networks  and  impede
cross(cid:220)frontier  provision  of 
temporary
restrictions  in  this  area  may  be  justifiable  by  the
requirement  to  ensure  effective  competition  between
operators  competing  in  the  relevant  markets,  as  long
as  there  is  no  effective  competition  in  the  local  loop.
This  could  be  particularly  important  in  geographic
areas  where  cable  networks  have  not  yet  been  fully
rolled  out.

61.(cid:217)In  conclusion,  as  only  two  Member  States  currently
maintain  explicit  restrictions,  the  adoption  of  a  hori(cid:220)
zontal  measure  at  this  stage  may  not  be  justified.
However,  the  situation  in  at  least  ten  Member  States
seems  undefined  and  barriers  to  the  future  devel(cid:220)
opment  of  the  convergent  multi(cid:220)media  markets  may
emerge  very  rapidly.  For  example,  in  Belgium,  the
telecommunications  operator  is  planning  to  invest
heavily  in  ADSL  technology  to  offer  high  speed
Internet  connections  to  customers  in  response  to  the
introduction  of  cable  modems  by  the  cable  TV
networks.  Accordingly,  the  Commission  will  keep
the  situation  under  review,  in  particular  in  respect  of
possible  impediments  of  the  development  of  the  EU
multi(cid:220)media  markets 
introduction  of
broadband  Internet  services).

(such  as 

5.1.3.(cid:217)Allocation  of 
local  loop

frequencies 

for  broadband  wireless

It  Member  States  were  to  delay  the  grant  of  licences
for  such  applications  for  reasons  other  than  the
non(cid:220)availability  of  radio  frequencies  these  delays
could  therefore  be  incompatible  with  the  Treaty.

64.(cid:217)The  current  restrictions  on  the  allocation  of  radio
frequencies  can  act  as  a  measure  equivalent  to  the
restriction  of  the  provision  of  cable  TV  capacity
particularly  for  new  innovative  services.  Therefore,  it
importance  that  Member  States
is  of  paramount 
fulfil  their  obligations  with  regard  to  the  allocation
of  new 
licences,  particularly  where  new  techno(cid:220)
logical  opportunities  allow  this.  In  the  near  future,
wireless  broadband  cable  TV  network  could  become
such  an  alternative.

5.1.4.(cid:217)Summary

65.(cid:217)The  Commission  will  bring  forward  a  measure  to
structurally  separate  jointly  owned  dominant  tele(cid:220)
communications  operators  and  cable  TV  companies.
In  addition,  it  will  keep  under  review  the  restrictions
on  the  provision  of  cable  TV  capacity  over  telecom(cid:220)
munications  networks  and  the  allocation  of  licences
of  radio  frequencies  for  the  broadband  local  loop
with  a  view  to  taking  action  should  it  be  justified.

62.(cid:217)In  the  light  of  the  effect  of  the  restrictions  in  the
allocation  of  radio  frequencies  on  the  overall  of

5.2.(cid:217)Case  specific  actions

(ˇ˛)(cid:217)ECJ  judgment  Mediawet  I,  25.7.1991,  ECR  Vol  I(cid:220)4069,

paragraph  14  onwards,  especially  paragraph  25.

66.(cid:217)The  horizontal  approach  outlined  above  will  only
suffice  as  a  minimum  application  of  the  competition

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of 

telecommunications 
Individual  action,  addressed 

rules  of  the  EU  to  the  issues  raised  by  the  joint
cable
ownership 
television. 
the
Member  States(cid:216)(ˇˇ)  or  to  undertakings  concerned(cid:216)(ˇ—)
the  optimum
to  ensure 
will  be  necessary 
conditions  for  the  development  of  telecommuni(cid:220)
cations  and  multimedia  take  place.

that 

and 

to 

The  Commission  will  need  to  examine  individual
cases  on  their  own  merits  as  they  arise.

67.(cid:217)Article  86  applies  to  individual  undertakings  which
hold  a  dominant  position.  In  this  sector  it  should  be
applied  a  fortiori  to  an  undertaking  which  is  the
owner  of  both  a  telecommunications  and  a  cable
network,  in  particular  when  it  is  dominant  on  both
markets.  Where  companies  enjoy  a  dominant
position  on  two  markets,  they  must  take  particular
care  not  to  allow  their  conduct  to  impair  genuine
undistorted 
that
dominance  cannot  be  leveraged  into  neighbouring
markets,  impede  the  emergence  of  new  services  or
strengthen  their  dominance  through  acquisitions  or
co(cid:220)operative 
or
vertically.

competition. 

horizontally 

particular, 

ventures 

either 

In 

unlawful  extension  of  a  dominant  position  by  taking
into  account  existing  case  law  and  the  evolution  of
market  circumstances  and  regulatory  frameworks.

70.(cid:217)The  Commission’s  options  for  action  under  Article
86  include  the  opening  of  own  initiative  cases  or
action  upon  the  receipt  of  a  complaint.  In  addition,
under  Article  85,  and  more  specifically  Regulation
17/62,  and  the  Merger  Regulation,  there 
is  the
possibility  of  the  Commission  receiving  a  notification
of  an  operation.  The  Commission  will  assess  such  a
notification  in  the  light  of  the  facts  underlying  the
case.  It  can  be  expected  that  an  extension  of  an
operator  dominant  in  both  telecommunications  and
cable  television  networks  into  related  fields  could
raise  serious  competition  concerns.

71.(cid:217)In  summary,  as  regards  case(cid:220)specific  action:

The  Commission  will  have  to  examine,  either  at  its
own  initiative  or  in  the  light  of  a  notification  or
complaint,  the 
in
Member  States  and  take  action  under  the  relevant
instruments  of  competition  law.

individual  situations  pertaining 

Within  the  framework  set  out  in  this  communication,
certain  common  approaches  can  be  identified,  within
the  context  of  the  existing  case  law  under  Articles  86
and  90.

6.(cid:217)CONCLUSION

68.(cid:217)In  certain  circumstances  it  might  be  that  the  only
means  which  would  allow 
the  creation  of  a
competitive  environment  consist  in  the  divestment  of
the  cable  television  network  by  the  telecommuni(cid:220)
cations  operator.  Other 
solutions  may  also  be
explored  depending  on  the  precise  circumstances  of
the  case(cid:216)(ˇ(cid:209)).

69.(cid:217)Under  Article  90  in  conjunction  with  Article  86,  the
Commission  may,  if  any  abuse  of  dominance  occurs
as  a  direct  consequence  of  a  state  measure, 
in
addition  to  the  horizontal  approach  set  out  in  5.1,
take  individual  action  to  prevent  abuses  such  as  the

reuglation’ 

72.(cid:217)This  Communication  has  not  addressed  media  and
content  issues.  The  Commission  has  published  on
these  more  general  issues  ae  "Green  Paper  on  the
convergence  of  the  telecommunications,  media  and
information  technology  sectors,  and  the  implications
("Convergence  Green  Paper’(cid:216)(ˇ(cid:210)).
for 
From 
view,
convergence  must  build  on  the  development  of  a
broad  base  of  pro(cid:220)competitive  infrastructures  of  tele(cid:220)
communications  and  cable  TV  networks.  Therefore
this  review  is  central  to  the  success  of  convergence  in
building  pro(cid:220)competitive  structures,  and  comple(cid:220)
mentary  to  the  "Convergence  Green  Paper’.

competition  policy  point  of 

a 

73.(cid:217)The  Commission  recognises  that  there  is  a  diversity
of  market  structures  across  the  EU  and  that  tailored
solutions  must  be  produced  which  are  appropriate  to
individual  circumstances.

(ˇˇ)(cid:217)Through  further  action  deriving  from  Article  90.
(ˇ—)(cid:217)Through  further  action  under  Article  86  or  Article  85  or  the

Merger  Regulation.

(ˇ(cid:209))(cid:217)See  in  particular,  section  I  of  the  Coudert  study.

(ˇ(cid:210))(cid:217)See  point  6.

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74.(cid:217)One  minimal  general  principle,  however,  can  -  and
should  -  now  be  applied  across  the  EU.  This  is  that
investments 
in  multimedia  by  dominant  operators
have  to  be  assessed  against  the  background  of  the
market  structures  in  place.  The  assessment  of  any
attempts  by  dominant  telecommunications  operators
to  expand  into  new  multimedia  areas  will  depend  on
the  introduction  of  the  necessary  structural  changes
or  other  adequate  safeguards.

75.(cid:217)The 

for  moving 

starting  positions 

the
convergent  markets  must  be  in  conformity  with  the
competition  rules.  Convergence  must  not  lead  to
the
new  multi(cid:220)media 
creation  of  growth(cid:220)oriented,  job(cid:220)rich  new  economic
structures.

super(cid:220)monopolies,  but 

into 

to 

the  Review  has  shown  that  the  current  accounting
separation  is  clearly  insufficient  in  those  cases.

could 

for  reducing 

positions.  Action 

78.(cid:217)Further,  the  Commission  intends  to  act  within  the
scope  of  Article  86,  or  of  Article  85  and  the  Merger
Regulation  on  a  case  by  case  basis,  where  appro(cid:220)
priate, 
the  anti(cid:220)competitive
further 
inherited  from  previous
effects  of  joint  provision 
the
be 
market 
Commission’s  own  initiative,  or  as  the  result  of  a
complaint  based  on  Article  86  by  an  affected  third
party.  In  addition,  the  Commission  will  act  as  a
result  of  notifications  by  a  dominant  telecommuni(cid:220)
company  of  an
cations  and 
expansion  into  new  multimedia  areas,  by  imposing
effective
further 
safeguards  where  necessary.  This  will  be 
in  the
application  of  either  Articles  85  and  86  or  the
Merger  Regulation,  as  cases  require.

changes  or  other 

structural 

television 

cable 

at 

76.(cid:217)The  joint  provision  of  telecommunications  and  cable
TV  networks  by  a  single  operator,  which  has  been
inherited  from  monopoly  provisions 
in  the  past,
creates  an  asymmetric  starting  position  for  dominant
telecommunications  operators  as  compared  to  new
entrants  as  the  various  different  multi(cid:220)media  markets
converge.  First,  it  will  act  as  a  significant  constraint
on  the  optimal  development  of  these  markets.  It  will
clearly  have  the  effect  of  reducing  competition  in
telecommunications  markets  as  new  entrants  will  be
unable  to  access  the  local  loop  independently  of  the
dominant  operator.  Second,  it  creates  at  least  an
incentive  and  a  strong 
likelihood  that  the  dual
dominant  operator  will  act  in  a  manner  which  will
the  development  of
stifle 
multimedia  markets  in  the  European  Union.

innovation  and  delay 

and 

networks 

in  separate 

77.(cid:217)The  Commission  therefore  will  act  in  two  ways.
First,  it  will  submit  an  Article  90  Directive  amending
Directives  90/388/EEC  and  95/51/EC  requiring
legal  separation  of  the  cable  television  companies
from  telecommunications  companies,  i.e.  operating
telecommunications
cable  TV 
in  particular
networks 
where  special  or  exclusive  rights  have  been  allocated
for  cable  operations.  This  will  increase  transparency
of  assets  and  costs  and  create  a  "walling  off’  effect
between  the  two  operations.  Most  importantly,  it
will  allow  regulators  and  the  competition  authorities
to  supervise  the  operations  of  cable  TV  networks  in
their  own  right.  This  separation  will  be  the  minimum
step  that  the  Commission  intends  to  take,  given  that

legal  entities, 

79.(cid:217)As 

regards 

restrictions  on 

telecommunications
operators  to  provide  cable  TV  capacity  over  their
the  Com(cid:220)
telecommunications  networks, 
public 
mission  will  keep  the  situation  under  review, 
in
particular  in  respect  of  possible  impediments  to  the
development  of  EU  multi(cid:220)media  markets.

80.(cid:217)As  far  as  the  allocation  of  radio  frequencies 

is
concerned,  the  Commission  will  also  keep  under
review  the  obligations  in  Member  States  contained  in
the  Full  Competition  Directive  (96/19/EC)  to  grant
licences  for  radio  frequencies  on  a  non(cid:220)discrimi(cid:220)
natory  basis.  The  Commission  will  monitor  this
process  closely  in  the  Member  States  and  will  take
action  if  necessary.

81.(cid:217)Where  the  Commission  intends  to  adopt  horizontal
measures  based  on  Article  90  (Amendment  to  the
existing  Article  90  Directives),  in  accordance  with
the  conclusions  drawn  in  Chapter  5,  it  will  follow
transparent  procedures  of  consultation.  It  will,  in
particular,  submit  such  amendments  to  the  European
Parliament,  the  Council  of  Ministers,  the  Social  and
Economic  Committee,  and 
the  Committee  of
Regions,  as  well  as  publish  them  in  the  Official

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Journal 
two(cid:220)month  consultation  period.

the  European  Communities 

of 

for  a

82.(cid:217)The  approach  set  out  in  this  Communication  will
telecommunications  and
in 
the  benefit  of  consumers,  by

promote  competition 
multimedia, 

for 

providing  the  opportunity  for  admitting  new  entrants
and  encouraging  competition  in  the  local  loop,  with
the  development  of 
innovative  new  services  for
European  consumers,  and  the  possibility  of  creating
a  strong  European  multimedia  industry  to  compete
effectively  on  world  markets.

ANNEX  1

OVERVIEW  OF  CABLE  TV  NETWORKS  IN  THE  EU

Total  TV  households  (in  millions)

Total  cable  subcribers  (in  millions)

Cable  penetration
(homes  connected/TV  homes)
EU  average

145,8

40,5

28(cid:216)%

Estimations  for  1997  based  on  projections.  Please  note  that  cable  penetration  varies  from  0  to  near  100(cid:216)%
across  Member  States.

ANNEX  2

Excerpt  from 

"Cable  review  -  Study  on  the  competition 

implications 

in  telecommunications  and

multi(cid:220)media  Markets’  (Executive  Summary),  Arthur  D.  Little

According  to  the  scope  of  the  study,  the  following  options  were  considered.

Options  for  joint  ownership

Broadly,  the  options  concerning  joint  ownership  fall  into  four  categories:

-(cid:217)maintaining  joint  ownership,

-(cid:217)partial  joint  ownership,

-(cid:217)divestiture  of  the  cable  TV  operation,

-(cid:217)transition  from  joint  ownership  to  divestiture.

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In  the  first  category,  six  options  were  examined.  They  impose  different  degrees  of  restrictions  on  the  joint
owner;  the  impact  on  the  development  of  infrastructure  and  services  increases  with  transparency  of  and
separation  within  the  joint  owner’s  group  of  companies.

The  second  category,  partial  joint  ownership,  covers  increasing  separation  of  the  cable  TV  company  from
the  joint  owner,  as  additional  shareholders  take  bigger  shares.  The  higher  their  share,  the  higher  the  impact
on  accelerated  development  of  infrastructure  and  services  in  the  Member  States.

Divestiture  of  the  joint  owner’s  cable  TV  network,  the  third  category,  has  a  high  impact  on  infrastructure
and  service  development,  leading  to  greater  capacity  increase,  greater  accessibility  of  residential  customers
and  availability  of  services,  high  innovation  and  the  ability  of  other  service  providers  to  offer  their  services
over  different  infrastructures.  Implementing  this  option  will  offer  a  sound  basis  for  development  of  tele(cid:220)
communication  and  multimedia  markets  in  line  with  the  European  Union’s  objectives.

In  the  fourth  category,  two  options  mentioned  by  many  interviewees  for  the  period  between  joint
ownership  and  partial  and/or  full  divestiture:  introducing  an  independent  trustee  and  structural  separation
were  looked  at.  These  options  can  be  combined.  In  the  Netherlands,  for  example,  KPN  has  not  only  to
separate  its  cable  operations  legally  from  the  telecommunications  operations  but  also  to  set  up  separate
management  and  an  independent  trustee.  The  regulator  enforced  these  steps  to  initiate  a  partial  divestiture
of  KPN’s  cable  operations,  moving  it  towards  an  eventual  minority  share  of  less  than  25  per  cent.

The  other  options  described  above  can  also  be  part  of  an  overall  transition  from  joint  ownership.

The  figure  below  summaries  the  results  of  the  examination  of  ten  main  options  within  the  four  categories
described.

Impact  on  infrastructure

Impact  on  services

Options  for  ownership

Capacity
upgrade

Accessibility
to  residential
customers

Cost
performance
improvement

Availability
of  products
and  services

Increasing
choice  of
service
providers

Innovation
rate  for  new
services  and
applications

Comments

1.(cid:217)Maintain  joint  owner(cid:220)
other

ship  without 
change

A

A

A

A

A

A

-(cid:217)No  cable  upgrade

-(cid:217)Less 

innovation 

in 

service

provision

-(cid:217)Slow  down  of  content  service

development

-(cid:217)No 

short  or  medium(cid:220)term

infrastructure  competition

-(cid:217)Strong  regulator  needed

-(cid:217)Influence  on  cable  upgrade  to

remain  competitive

-(cid:217)Increasing  availability  of  pro(cid:220)
ducts  and  services  because  of
rising  competition

2.(cid:217)Maintain  joint  owner(cid:220)
develop(cid:220)
towards  digital

ship/DTH 
ment 
multichannel  services

A

A

A

a

a

A

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Impact  on  infrastructure

Impact  on  services

Options  for  ownership

Capacity
upgrade

Accessibility
to  residential
customers

Cost
performance
improvement

Availability
of  products
and  services

Increasing
choice  of
service
providers

Innovation
rate  for  new
services  and
applications

Comments

-(cid:217)Rising  number  of 

service

providers  in  the  market

-(cid:217)No 

impact  on  upgrade 

to

bi(cid:220)directional  services

-(cid:217)Extended  content  service  com(cid:220)

petition

A

a

A

a

a

A

-(cid:217)Strong  regulator  required

3.(cid:217)Maintain  joint  owner(cid:220)
ship 
establish
but 
ONP  on  joint  owner’s
cable  network

4.(cid:217)Maintain  joint  owner(cid:220)
ship  but  open  up  spec(cid:220)
trum  for  wireless  local
loop  (narrowband)

a

a

A

A

a

a

5.(cid:217)Legal  separation

(creation  of  100(cid:216)%
subsidiary)

A

A

a

a

a

A

6.(cid:217)Legal  separation  and
separ(cid:220)

management 
ation

A

a

a a

a a

a

A

-(cid:217)Cable 

upgrade 

requirements 
between  countries

vary 

investment
strongly

-(cid:217)Potentially  medium(cid:220)term  infra(cid:220)

structure  competition

-(cid:217)Potential  devaluation  of  cable

-(cid:217)Joint  owner  forced  to  upgrade
cable  to  remain  competitive

-(cid:217)Increase  of 
development

content(cid:220)service

-(cid:217)Digital, 

two(cid:220)way  broadband
technology  not  yet  available
at  competitive  price,  wide(cid:220)
spread  rollout  not  realistic  in
near  future

-(cid:217)Minimum  condition  for  effec(cid:220)
tive  surveillance  of  competi(cid:220)
tive  behaviour

-(cid:217)Transparency  of  assets  and

costs

-(cid:217)Clear  allocation  of  profit/loss

-(cid:217)Allows  shareholders  and  regu(cid:220)
lators  to  see  profitability  of
cable  TV

-(cid:217)As  point  5

-(cid:217)Separate  management  needs
to  present  achievements 
to
shareholders  and  public

-(cid:217)Motivation 

for  management
to  increase  number  of  services
and  network  performance

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7.3.98

Impact  on  infrastructure

Impact  on  services

Options  for  ownership

Capacity
upgrade

Accessibility
to  residential
customers

Cost
performance
improvement

Availability
of  products
and  services

Increasing
choice  of
service
providers

Innovation
rate  for  new
services  and
applications

Comments

-(cid:217)Financial 

and  management
details  still  have  to  be  revealed
to  parent  company

7.(cid:217)Partial  joint
ownership

7.1.(cid:217)Incumbent  owns

r 50(cid:216)%

a

a a

a a

a a

a a

a

-(cid:217)All  of  points  5  and  6

-(cid:217)Majority  of 

shares  allows
joint  owner  to  make  man(cid:220)
agement  decisions  and  there(cid:220)
fore  avoid  competition  be(cid:220)
tween  the  two  infrastructures

-(cid:217)Specific  contract  with  other
shareholders  may 
impact
development  of  infrastructure
and  services

7.2.(cid:217)Incumbent  owns

q  50(cid:216)%

a a

a a

a a a a a a a a a

a a

7.3.(cid:217)Incumbent  owns

q  25(cid:216)%

a a a a a a a a a a a a a a a

a a

-(cid:217)Cable 

upgrade 
according  to  business  case

achievable

-(cid:217)Higher  possibility 

for  ad(cid:220)
ditional  service  providers  next
to  joint  owner

-(cid:217)Financial 

and  management
decisions  have  to  be  revealed
to  parent  company

-(cid:217)Blocking  vote  of  joint  owner
competitive

against  major 
action,  i.e.  in  POTS

-(cid:217)Since 

joint  owner  does  not
have  "blocking’  minority  vote,
a  full  service  competitor  can
be  established  by  management
according  to  business  case

-(cid:217)Joint  owner  can  keep  link  to
the
cable  TV  network 
provision  of  cable  TV  services

for 

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Impact  on  infrastructure

Impact  on  services

Options  for  ownership

Capacity
upgrade

Accessibility
to  residential
customers

Cost
performance
improvement

Availability
of  products
and  services

Increasing
choice  of
service
providers

Innovation
rate  for  new
services  and
applications

Comments

8.(cid:217)No  joint  ownership

a a a a a a a a a a a a a a a a a a -(cid:217)Service and infrastructure com(cid:220)

Additional  options  for  transitional  periods

9.(cid:217)Independent  trustee

A

a a

a

a a

a a

A

10.(cid:217)Separation  of  network
and  services  (creation
of 
subsidi(cid:220)
aries  for  joint  owner)

separate 

a

a a

a

a

a

a

petition

-(cid:217)Increased  accessibility  of  resi(cid:220)

dential  customers

-(cid:217)Full  upgrade  of  cable  TV

network

-(cid:217)Technology  improvement  usa(cid:220)
ble  as  competitive  advantage(cid:220)
continuous  network  operator

-(cid:217)Increasing  choice  of  service
providers, 
similar
services,  because  of  additional
capacity  and  competing  infra(cid:220)
structures

even  of 

-(cid:217)Independent  trustee  is  able  to
optimise  cost/performance  of
networks

-(cid:217)Independent  trustee 

likely
to  receive  funds  for  network
upgrade

is 

-(cid:217)In  The  Netherlands 

the
trustee  option  is  used  during
the  transition  to  partial  di(cid:220)
vestiture

-(cid:217)Very  limited  network  upgrade
owing 
to  risk  aversion  of
network  owner  (cannot  par(cid:220)
ticipate  in  upside)

-(cid:217)Price  increase  since  network
operation  has  to  be  profitable
stand  alone

-(cid:217)Strong  regulator  needed 
control  increasing  prices

to

-(cid:217)If  service  providers  are  al(cid:220)
in  network
invest 
lowed  to 
upgrade,  "shared  ownership  is
created’.

A No  impact(cid:218)(cid:218)a Low  impact(cid:218)(cid:218)a a Medium  impact(cid:218)(cid:218)a a a High  impact

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Restrictions  on  the  provision  of  cable  TV  capacity

Three  policy  options  for  the  provision  of  cable  TV  capacity  can  be  considered:

-(cid:217)Maintaining  the  status  quo

-(cid:217)Lifting  restrictions  on  specific  PTOs  and/or  giving  dominant  PTOs  rights  to  provide  cable  TV  capacity

over  telecommunications  infrastructure

-(cid:217)Lifting  restrictions  on  licences  for  cable  TV  infrastructure.

As  shown  in  the  figure,  lifting  restrictions  that  apply  specifically  to  PTOs  and  giving  them  rights  to  provide
cable  TV  capacity  over  their  existing  networks  would  have  limited  impact  on  the  market,  but  lifting  the
general  restrictions  on  licence  availability  for  cable  TV  infrastructure  would  have  a  major  impact  on  the
long  term  development  of  broadband  multi(cid:220)media  markets.

Impact  on  infrastructure

Impact  on  services

Options  for  lifting  restrictions
on  the  provision  of  cable  TV
capacity

Capacity
upgrade

Accessibility
to  residential
customers

Cost
performance
improvement

Availability
of  products
and  services

Increasing
choice  of
service
providers

Innovation
rate  for  new
services  and
applications

Comments

1.(cid:217)Maintain  status  quo

a

a

A

a

A

A

2.(cid:217)Lift 

restrictions 
on
specific  PTOs  and/or
give  dominant  PTOs
rights  to  provide  cable
TV  capacity  via  tele(cid:220)
communications 
infra(cid:220)
structure

a a

a a

a

a a

a

a

-(cid:217)In 

seven  Member 

States
restrictions  on  new  broadband
infrastructure  remain

-(cid:217)Reduced  opportunity  for  com(cid:220)
in

innovation 

petition  and 
multi(cid:220)media  services

-(cid:217)Potentially 

impact  as
large 
removes  legal  uncertainty  and
explicit  restrictions  on  PTOs

-(cid:217)Potential 

competitive 

risk
through  enhanced  position  of
dominant  PTOs

3.(cid:217)Lift  restrictions  on 

li(cid:220)
for  cable  TV

cences 
infrastructure

a a a a a a

a a

a a a a a a a a a

-(cid:217)Lifts  specific  restrictions  on
PTOs  where  they  exist  (UK
and  Spain)

-(cid:217)Removes  asymmetry  between
cable  and  telecoms  regulation

-(cid:217)Potentially  high 

impact  on
creation  of  new  broadband
networks 
and  multi(cid:220)media
services

A No  impact(cid:218)(cid:218)a Low  impact(cid:218)(cid:218)a a Medium  impact(cid:218)(cid:218)a a a High  impact