Communication from the Commission - Unbundled access to the local loop: enabling the competitive provision of a full range of electronic communication services, including broadband multimedia and high-speed Internet (Text with EEA relevance)
Date: 2000-09-23
Institutions: European Commission
Subjects: EU Member State, communications policy, competition law, information network, information system, information technology

23.9.2000

EN

Official Journal of the European Communities

C 272/55

COMMUNICATION FROM THE COMMISSION

Unbundled access to the local loop: enabling the competitive provision of a full range of electronic
communication services, including broadband multimedia and high-speed Internet

(2000/C 272/10)

(Text with EEA relevance)

1.

INTRODUCTION

1.1. Objectives

Germany,
report (3)).

Italy, Netherlands, UK,

see fifth implementation

The main policy objectives that underpin the existing regu-
latory framework, as set out in the Commission’s Communi-
cation on the 1999 Review (1) are:

1.2. Background

(cid:151) to promote an open and competitive European market for

communications services,

(cid:151) to benefit

the European citizen in particular

through

creating new job opportunities,

(cid:151) To consolidate
environment.

the

internal market

in a converging

The Commission Recommendation on unbundled access to the
local loop (2) fits into this framework and with the conclusions
of the Lisbon Summit, of accelerating Europe’s transition to the
new information society, in particular through the deployment
of cheap internet services. It identifies actions that Member
States are invited to take to address limited competition in
the local access network where the incumbent continues to
dominate both the provision of voice telephony and the devel-
opment of higher bandwidth services.

Providing access to the local
loop to all new entrants will
increase the level of competition and technological innovation
in the local access network, which will in turn stimulate the
competitive provision of a full range of
telecommunication
services from simple voice telephony to broadband services
to the customer. The types of broadband technologies now
available (see Annex I) are well suited to providing cost-
leased circuits and high speed Internet access to
efficient
small and medium-sized enterprises, and to the top end of
the consumer market. As the market grows and economies
of scale are realised, lower prices will make these broadband
services accessible to a large part of the population. Experience
shows how quickly demand can grow once the price is right.

copper wires

The local
loop refers to the physical circuit between the
customer’s premises and the telecommunications operator’s
facility. Traditionally it takes the
local switch or equivalent
form of pairs of
(one pair per normal
telephone line), but increasingly fibre-optic cables are being
deployed to connect large customers, and other technologies
are also being rolled out in the local access network (4). Local
loop unbundling has been mandated in certain Member States
and is used mainly for the connection of those customers for
which the deployment of optical fibre is not an economically
viable alternative, such as small and medium-sized enterprises
(SMEs) and residential customers.

In its communication on the 1999 review, the Commission
noted that the availability of unbundled access to the local
loop increases competition and that
it could in addition
speed up the introduction of high speed Internet access
services. During the public consultation on the Review a
broad consensus has emerged on the necessity of unbundled
access to local loops for the emergence of advanced services in
a competitive environment (5).

local

the ubiquity of

This results from the fact that operators rolled out their local
access networks over significant periods of time protected by
exclusive rights and were able to fund its investment costs
the
through monopoly rents.
In addition,
copper
infrastructure controlled by the
loop access
incumbent operator is not in all circumstances economically
feasible to duplicate, and alternative local access infrastructures
(cable TV, wireless local loops, satellite, etc) cannot usually be
constructed with the same ubiquity and competitive conditions
within a reasonable time.
technical and
commercial viable alternatives refusal to supply access by a
dominant company holding such an infrastructure may in
the circumstances of the specific case and in the light of the
case-law of the Community courts, constitute an infringement
of Article 82 of the Treaty.

In the absence of

Several Member States have already mandated or have formally
Finland,
fixed dates

for unbundling (Austria, Denmark,

(3) COM (1999) 537, 11 November 1999, Fifth report on the
regulatory package,
the telecommunications

implementation of
see http://www.ispo.cec.be/infosoc/telecompolicy/5threport.html
(4) Wireless local loops, power line networks etc, in addition to cable

(1) COM(1999) 539. http://www.ispo.cec.be/infosoc/telecompolicy/

TV networks.

review99/review99en.pdf
(2) OJ . . . (to be published).

(5) Communication from the Commission on the results of the public
consultation on the 1999 communications review (COM(2000). . .).

C 272/56

EN

Official Journal of the European Communities

23.9.2000

2. MEANS OF ACCESS TO THE LOCAL LOOP

To overcome the limited current competition in the local
access network referred to above, three means of access to
the local loop are considered:

1. Full unbundling of the local loop (unbundled access to
the copper pair for the competitive provision of advanced
services by third parties).

The Commission considers that these three means of access to
the local loop should be seen as complementary. The avail-
ability of only some of these means of access is not enough.
Together they serve to reinforce competition and improve
choice for all users, by allowing the market to decide which
offering best meets users needs,
the
evolving demands of users and the technical and investment
requirements for market players.

taking into account

3. THE COMPETITIVE SITUATION OF MARKETS

full

In the case of full unbundling of the local loop, the copper
pair is rented to a third party for its exclusive use. The
lessee has
relationship with its
customer for the provision of a full range telecommuni-
including deployment
cation services over the local
for high speed
of digital subscriber line systems (DSL)
data applications.

control of

loop,

the

2. Shared use of the copper line (unbundled access to the
high frequency spectrum of
the
competitive provision of DSL systems and services by
third parties).

loop for

local

the

In this form of access, the incumbent operator continues to
provide telephone service, while the new entrant delivers
high-speed data services over the same local
loop using
its own high-speed ADSL modems. Telephone traffic and
the data traffic are separated by means of a splitter before
the incumbent’s switch. The local loop remains connected
to, and part of, the public switched telephone network.

3. High speed bit stream access (provision of DSL services

by incumbent)

High-speed bit-stream access refers to the situation where
the incumbent
installs a high speed access link to the
customers premises (e.g. by installing its preferred ADSL
equipment and configuration in its local access network)
and then makes this access link available to third parties,
to enable them to provide high-speed services to customers.
The incumbent may also provide transmission services to its
competitors,
in the
to carry traffic to a (cid:145)higher(cid:146)
network hierarchy where new entrants may already have a
point of presence (e.g. a transit switch location).

level

This type of access does not actually entail any unbundling
of the copper pair in the local loop (but it may use only the
higher frequencies of the copper local loop as in (2) above).

Further technical details can be found in the Annex.

economic

and
loop.

In spite of

This section examines the present competitive situation in local
for
the
loop-related markets
rationale
unbundling the local
the liberalisation of
voice telephony on 1 January 1998 in most Member States,
the incumbent’s market power remains unchallenged on a
significant part of telecommunications markets. One of the
main reasons for this is the bottleneck situation on the local
loop-related markets, because the incumbent’s local loop is the
key infrastructure providing incumbents with a privileged
access to end-users for the delivery of retail telecom services.

3.1. Incentive

effects of

local

loop unbundling on

increased competition and economic efficiency

local

While commercial negotiation is the preferred method for
reaching agreement on the price of
loop access,
experience shows that in most cases regulatory intervention
is necessary. The lack of competition in this area means that
it is appropriate for the national regulatory authority (NRA) to
impose obligations for pricing to be cost-oriented, based on
specific principles and methods in order to achieve long-term
sustainable and efficient competition and provide predictability
to market players.

local

that does not distort

In order to achieve the aim of increased consumer choice the
in
economic incentives created by the policy framework,
the pricing methodology, must
particular
all
encourage
investments. Thus when
appropriate
to make
operators
priced at a level
the (cid:145)make or buy(cid:146)
decision of an entrant,
loop unbundling can encourage
long term infrastructure competition by allowing entrants to
test out the market before building their own infrastructure,
and can encourage a more competitive and innovative market
for simple voice telephony and the roll-out of local broadband
(high-speed) services. While it is possible that the incumbent
will introduce these technologies in its own time, the speed of
take-up is likely to be increased if entrants are also allowed to
upgrade the incumbent’s local
loops and offer broadband
service directly to users. This freedom for new entrants to
roll-out services independently of the decisions of a dominant
operators is a strong argument for local loop unbundling rather
than resale because, with resale, entrants are constrained to
offering similar services to those provided by the dominant
provider.

It is important to establish the framework for any mandated
access to local loops of incumbents, and accompanying pricing
controls, against a standard of promoting economic efficiency,
enabling wider competition and maximising consumer and
user welfare.

23.9.2000

EN

Official Journal of the European Communities

C 272/57

3.2. Market analysis (cid:151) market power of incumbents (cid:151)

the local loop’s key role

services:

fixed telephony retail

In the Full Competition Directive (6), the Commission distin-
guished various
the initial
connection, the monthly rental, local calls, regional calls and
long distance calls. While categories of services have to be
monitored closely, particularly given the speed of technological
change, and regularly reassessed on a case-by-case basis, these
substitutable for one
services are presently normally not
another, and would therefore be considered as
forming
different relevant markets.

The local
delivery of
categories of retail services markets are involved:

loop is primarily an infrastructure allowing the
services. Two main

telecommunications

retail

(cid:151) the first is the traditional fixed telephony retail services
offered to residential users,
to professionals and small
firms and to large businesses. This market is already very
well developed and mature,

(cid:151) the second is a new emerging market and consists in
high-speed telecommunication services which can be
loop in the form of DSL services.
delivered on the local

the local

Additionally,
loop is a commodity which can be
priced and rented to competitors: this means that as soon as
access is given to this part of the incumbents’ network a new
access market develops which is also a relevant market to take
into consideration.

As a result of the liberalisation of voice telephony services as of
1 January 1998 in most Member States, the service offerings of
new entrants have developed quickly particularly in the inter-
national calls market and, to a lesser extent, the regional calls
market. At the same time, given the cost of investment in local
access network infrastructure and/or dependence of the service
offerings of the incumbent, competition in provision of full
voice telephony services (including the connection, monthly
rental and local calls markets)
is concentrated on business
customers in urban areas. As a result each of these markets
has a very different competitive situation and, whilst
the
market share of the incumbents has decreased in international
and regional call markets, they still deliver the bulk of access
services to end-users (cid:151) the connection and the line rental (cid:151)
and hold a share of the local calls market which, except in the
UK, is well above 90 % and in most cases close to 100 %.

as

like networks

the provision of

connecting office buildings or

these
alternatives
Fibre-optic networks

retail services to end-users. Other alternatives exist such as
fibre-optic networks, wireless loops or upgraded cable TV
can be
networks. However, none of
considered
are
an equivalent.
presently only competitive on upstream transmission links
in special
and, as concerns the retail distribution network,
niches
a
narrowly defined geographical area. Wireless loops appear in
the near and medium term future most suitable to address the
specific needs of professional clients and small firms, or indi-
vidual end-users with particular needs, but would remain
uneconomic for serving the large majority of the residential
clientele. Cable networks which were designed for one-way
TV need costly upgrades
two-way
for
telecom services, and the provision of high-speed services on
cable involves customers sharing the capacity of a cable
channel, which means that high-speed data via cable modems
does not offer the same capacity as the copper pair upgraded
with DSL technologies, which is dedicated to every single
end-user. Additionally,
cable networks do not normally,
except maybe in a few countries where the situation would
have to be assessed on its own merits, have a nationwide
coverage which would allow entrants
to serve the same
geographic markets as incumbents, whether for traditional
voice telephony retail services or new DSL services. Other
innovative
electricity
such as
networks do not appear to be a technically or economically
viable alternative solution at present. While this may over time
change, at present none of these alternative networks, nor even
their combined use, can for the purposes of delivering retail
narrow and large bandwidth telecommunications services be
considered as a nation-wide alternative to the incumbents’
copper pair.

the use of

technologies

no

local

bottleneck

The incumbents’
loop networks have been developed
nationwide in each of the Member States. New entrants have
licences delivered by the national authorities and are also
expected to compete on the national markets. Therefore the
geographic market where competition would in the absence of
a bottleneck situation normally develop is the national territory
of each Member State: this is what already happens for inter-
national and long distance calls for which, owing to access via
interconnection,
the
deployment of nationwide offers by new entrants. The
bottleneck situation experienced so far for the provision of
access and local calls services and now for the provision of
high-speed services does not prevent new entrants
from
developing local networks, at a more limited level, such as in
densely populated urban areas, but with these networks they
are normally unable to compete nationwide on an equal
footing with incumbents, providing the same whole range of
services (see below). The Member States’ territory is, according
to the existing case law, a substantial part of the common
market.

situation

impedes

local access network (i.e. the copper pairs
The incumbents’
connecting end-users to the closest distribution frames) is not
the only technical infrastructure allowing for the provision of

(6) Directive 96/19/EC, recital 20 (OJ L 74, 22.3.1996, p. 13).

Thus, without unbundled access to the incumbents’ local loop,
and despite recent major steps like the introduction of carrier
preselection for telephone calls, new entrants are unable to
compete on several markets
including the provision of
high-speed services to most end-users. This situation may
change over the long run. New developments shall have to
be monitored closely.

C 272/58

EN

Official Journal of the European Communities

23.9.2000

Incumbent operators enjoy a position of dominance on the
traditional (cid:151) narrowband (cid:151) market for telephony services.
This is clear from an examination of the market shares of
incumbents (cid:151) the most traditional way to assess dominance.
The incumbent’s market share is in all circumstances well
above 50 %, even on the most competitive relevant market
(international calls)
in the most open geographical market,
the United Kingdom, where liberalisation started already in
the 1980s. As noted above in other markets, such as local
calls the market shares of the incumbents is in the majority
of cases well above 90 %, and often close to 100 %.

the local

selection allow for an
While interconnection and carrier
opening to competition of the long distance and international
calls markets,
loop is the key infrastructure for
providing access services to end-users (i.e. the connection and
line rental) and remains within the incumbents’ control.
Although in some countries carrier preselection also allows
the delivery of local call services (call origination) by alternative
operators, where this is not yet the case the local loop is also a
key infrastructure for providing local calls services. Therefore
the local loop is a bottleneck infrastructure for the nationwide
distribution of retail access and also, in most cases, local call
services, which form two relevant markets of non-substitutable
services.

The situation in the new markets for high-speed services is less
obvious. Where new high-speed services are offered the
incumbents is nevertheless already strong and
presence of
they would under the present conditions be able to consolidate
their dominant position on this new market as well, owing to
their privileged access to end-users through the nationwide
existing copper pair networks.

in spite of

Thus it appears that the control of the incumbent’s nationwide
local loop gives them a considerable leverage for maintaining
their dominant positions on existing voice telephony retail
their liberalisation, or for establishing
markets,
similar positions on new emerging markets
for high
bandwidth services. The incumbent’s copper pair is the key
(i) access voice telephony retail
infrastructure for providing:
services, which includes call termination; (ii) local call (orig-
to
ination)
end-users. These services form three separate relevant markets.

services (7); and (iii) high bandwidth services

Given the size of investments required, the absolute cost of
nationwide duplication of
the incumbents’ network with a
similar population coverage is likely to be a barrier to entry
for any competitor. This infrastructure appears to be with
technologies economically unfeasible (8), or unreas-
present

(7) Where carrier selection and preselection is not yet available for

local call (origination) services.

(8) See Judgment of the ECJ of 26 November 1998. Oscar Bronner
GmbH & Co. KG v Mediaprint Zeitungs- und Zeitschriftenverlag
GmbH & Co. KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co.
KG and Mediaprint Anzeigengesellschaft mbH & Co. KG. Case C-7/97,
paragraph 44.

to duplicate at a nationwide level (9)

onably difficult
in a
important
reasonable
even for
time period,
competitors of existing incumbents,
in particular incumbent
operators from other Member States which develop their
activities in neighbouring European countries, alone or in
cooperation with others.

the most

It

is highly improbable that all

A refusal from an incumbent to give access to competitors on
its local loop is thus likely to eliminate the possibility for new
entrants to compete at all on the nationwide market (10) for the
three identified services, and they would be limited to regional
and local markets where they succeed in building alternative
those alternative
networks.
networks put together will
in a reasonable time period be
able to match the incumbents’ nationwide network of copper
pairs and address the same entire customer population. It is
therefore considered that the local
loop is presently essential
and thus access is necessary for competitors in order for them
to be able to compete nationwide on a level playing field with
incumbents on the three identified retail services markets and
to address the same customer population.

Given the speed of technological change and market devel-
economic
opments which influence
the
the present
assessment of alternatives to the copper pair,
analysis may need to be reviewed and is without prejudice to
individual case-related decisions.

technical

and

4. APPLICATION OF COMPETITION RULES

4.1. The

duty

of

the

dominant

operator

under

competition rules to grant access to the local loop

Refusing to grant access to the local
loop to competitors
requesting access is likely to imply various forms of abuses
of dominant position under article 82 of the Treaty.

(cid:151) Refusal

if

to deal: on the three relevant markets identified,
where the incumbent is the only provider of services over
the local loop, a refusal to let competitors have access to
the incumbent’s local loop may under certain circumstances
be contrary to Article 82,
it would prevent any
competition on the relevant nationwide markets and if it
is indispensable for the provision of nationwide services to
to be the case at present. The
end-users as appears
dominant operator would have to provide local
loop
access to all competitors on no less favourable conditions
than those for its own downstream operations. Under a
certain set of conditions access to the local loop may be
requested:

(cid:151) sufficient capacity must be available in the incumbent’s

network to provide access,

(9) Except maybe in the smallest of EU countries, Luxembourg.
(10) See Oscar Bronner Judgment, paragraph 38.

23.9.2000

EN

Official Journal of the European Communities

C 272/59

(cid:151) a refusal of access would limit the emergence of new
services or prevent any competition on the relevant
markets as defined above,

and be attacked under Article 82 on the same basis as a
refusal.

(cid:151) the requesting party is ready to pay a non-discrimi-

natory price for the access,

(cid:151) and there is no objective justification for refusing access.

(cid:151) Discrimination: on the three relevant markets identified,
loop
where the incumbent
access to at
its own
subsidiaries, a refusal of access may under certain circum-
stances amount to discrimination and constitute an abuse
of dominant position.

least one operator, be it one of

is already providing local

(cid:151) Limitation of production, markets, or technical development to the
prejudice of consumers. Refusal of access in the form of
shared access or full unbundling may in certain circum-
stances limit
the development of emerging markets like
high speed telecom and Internet services, or impede the
development of competition on existing markets such as
traditional voice telephony services.

(cid:151) Discrimination. Abusive discrimination can take many
different forms, such as discriminatory pricing, delays in
granting access or delays in remedying technical problems
related to the access, the technical configuration of
the
access and in the specific case of local loop access (e.g. if
include operating system and support
access does not
services or other functions used by the incumbent
to
offer services via the local
loop), discrimination in the
terms on which collocation is (or is not) offered. Such
practices could constitute discriminatory behaviour as
caught by Article 82(c).

loop,

to the local

(cid:151) Price abuses. Prices may be another way for incumbents,
to
while formally granting access
restrict
competition. Three main categories of price
abuses can potentially occur. Excessive access prices to
the loop, predatory prices on services offered to end-users
or margin squeezes between the two latter prices could all
constitute infringements of Article 82 of the Treaty. The
scope for margin squeezes is likely to be higher where the
incumbents’ tariffs have not been fully rebalanced on a cost
recovery basis.

An incumbent, by making the shared access on high-speed
services (see point 2) conditional upon the continued
provision of its own narrow bandwidth telecom services
to the same end-users, and thereby refusing full
local
loop unbundling, may in certain circumstances behave in
an abusive way. Such restriction would lead to a distortion
of competition, by limiting the possibility of competitors to
enter the markets or to develop their activities, and, given
the
successfully been
introduced in a number of countries, would need to be
objectively justified.

full unbundling has

that

fact

4.2. Dominant operators’ duties regarding the conditions

of access and pricing

formally refuse upon
Where dominant operators do not
request partial or
loop, but
full unbundling of
define a set of conditions of access which restrict competition,
other forms of abuse may occur which would as well constitute
infringements of Article 82 of the Treaty.

the local

is delayed,

(cid:151) Delays. Access should normally be granted promptly.

If
granting access
the incumbents would in
practice be able to reserve for themselves the emerging
market for high-speed services based on DSL technologies,
thereby extending their dominant positions for the network
into this new area of activity, or deferring the possibility for
new entrants to compete on a level playing field on several
voice telephony relevant markets. The effects of such delays
without objective reasons could therefore be the same, at
least in the short term, as an outright refusal to give access

5. APPLICATION OF SECTOR SPECIFIC RULES (ONP)

5.1. General

The open network provision (ONP) framework concerns the
harmonisation of conditions for open and efficient access to,
and use of, public telecommunications networks and, where
services. The ONP
applicable, public
telecommunications
to, and use of,
set out conditions
Directives
specific types of networks and/or services;
thus the Leased
Lines Directive (11) deals with access to and use of leased line
transmission capacity, the Voice Telephony Directive (12) deals
with access to and use of public telephone networks and
services, including special innovative access, and the Intercon-
nection Directive (13) deals with interconnection of and access
to public telecommunications networks and services in general.

for access

(11) Council Directive 92/44/EEC of 5 June 1992 on the application of
open network provision to leased lines (OJ L 165, 19.6.1992, p.
27), as amended by Directive 97/51/EC of the European Parliament
and of the Council of 6 October 1997 (OJ L 295, 29.10.1997, p.
23), and Commission Decision 98/80/EC of 7 January 1998
(92/44/EEC, OJ L 14, 20.1.1998, p. 27).

(12) European Parliament and Council Directive 98/10/EC of 26
February 1998 on the application of open network provision to
voice telephony (OJ L 101, 1.4.1998, p. 24).

(13) Directive 97/33/EC of the European Parliament and of the Council
of 30 June 1997 on interconnection in telecommunications with
regard to ensuring universal service and interoperability through
application of the principles of open network provision (ONP), (OJ
L 199, 26.7.97, p. 32), as amended by Directive 98/61/EC of the
European Parliament and of the Council of 24 September 1998
with regard
carrier
pre-selection (OJ L 268, 3.10.1998, p. 37).

portability

operator

number

and

to

C 272/60

EN

Official Journal of the European Communities

23.9.2000

(cid:145)Network access(cid:146) as used in ONP Directives means making
accessible some part or parts of an existing network for use
by another party, but does not involve an interference with
ownership of
the network element(s). Obligations in sector
specific Directives to deal with or meet requests for network
access (which apply to operators notified as having significant
market power) do not oblige incumbents to provide full
loops, although this is without
unbundled access to local
prejudice to obligations
that may be
imposed on dominant operators under competition rules.
Only the leased line Directive mandates notified operators to
lease transmission capacity under harmonised conditions to
third parties for their exclusive use.

to provide (cid:145)access(cid:146)

5.2. Special network access

Shared access to the high frequency spectrum of the local loop
is covered by Article 16 of the Voice telephony Directive and
Article 4 of
the Interconnection Directive. High speed bit
stream access services are covered by Article 16 of the Voice
telephony Directive and the provision of associated trans-
mission capacity (back-haul) by Article 10 of the Leased lines
Directive. Full unbundled access to the local
loop is not
covered by the ONP Directives.

Where an operator notified as having significant market power
under the Voice Telephony Directive provides shared access to
the local loop for its own services, it is granting itself special
network access,
in that it is making use of the fixed public
telephone network for providing publicly available telecom-
munications
the notified
operator must apply similar conditions to other organisations
providing similar services, and must provide special network
access facilities and information to others under the same
conditions and of the same quality as they provide for their
own services or
subsidiaries or partners
their
(Directive 98/10/EC, Article 16(7)).

In these circumstances,

those of

services.

Where a notified operator is not already providing itself with
such access, it must at least deal (14) with reasonable requests
for special network access. Given that
the majority of EU
operators grant themselves shared access to the local loop for
for such access from a new
their own services, a request
entrant cannot be considered to be an unreasonable request.
Then, the obligation to deal with requests for access can only
be refused if
the two following conditions are both met
(Article 16(1)):

(cid:151) there are technically and commercially viable alternatives to

the special access requested, and

(cid:151) the requested access is inappropriate in relation to the

resources available to meet the request.

Since shared access applies to existing local loops, it will only
rarely be the case that resources are not available to meet the
request, and so in most cases both conditions for refusal to
provide access will not be met. Any such refusal would need to
be justified on a line-by-line basis.

5.3. High-speed bit-stream services

The provision of high-speed bit-stream services
is not
mandated under Community law, but where an incumbent
operator provides bit-stream DSL services to its own services,
subsidiary or third party, then, in accordance with Community
law,
it must also provide such forms of access under trans-
parent and non-discriminatory terms or conditions to others
(Directive 98/10/EC, Article 16 (7)).

High-speed bit-stream access cannot be considered to be econ-
omically or technically equivalent to providing access to the
loop, since a high-speed bit-stream
copper pair in the local
service requires
to use the high-speed
modems and other equipment provided by the incumbent,
and that
the service and
places restrictions on the type of modems that the customer
of the new entrant can buy or rent (15).

in turn affects the economics of

the new entrant

5.4. Leased line transmission capacity

Those operators notified as having significant market power for
the fixed public telephone network have also been notified as
the Leased Lines
having significant market power under
Directive (16) 92/44/EEC. As such they have obligations to
provide leased transmission capacity to others under
the
same conditions and of the same quality as they provide for
their own services, or those of their subsidiaries or partners
(Leased Lines Directive 92/44/EEC, Article 8(2)).

When a notified operator provides a high-speed bit-stream
service, it typically conveys customer traffic to one or more
points where service providers can interconnect, so that the
service providers do not have to build out their network to all
local exchanges equivalent facilities. Where leased transmission
capacity is provided internally for this, the non-discrimination
provision of Article 8(2) of Directive 92/44/EEC applies.

(15) International standardisation has not yet reached a stage where
interoperability between DSL systems from different manufacturers
of
can be
performance.

guaranteed without

significant

involving

loss

(14) Directive 98/10/EC imposes an obligation to (cid:145)deal(cid:146)

requests.
Directive 97/33/EC imposes the stronger obligation to (cid:145)meet(cid:146)
requests.

(16) See ISPO http://www.ispo.cec.be/infosoc/telecompolicy/en/comm-

en.htm#misc
1 January 2000 (cid:151) Information received from Member States
concerning organisations with significant market power.

23.9.2000

EN

Official Journal of the European Communities

C 272/61

5.5. Collocation

the

the local

third parties

To be effective, providing rights for unbundled access to the
local
loop must be accompanied by provision of rights for
collocation. National regulatory authorities (NRAs) need to
that are granted
to ensure that
take steps
loops are also able to collocate
unbundled access to local
equipment on the premises of
loop operator.
Article 11 of
Interconnection Directive 97/33/EC
acknowledges the right of Member States to impose collocation
arrangements. Where physical collocation is not possible due
to space limitations, national regulatory authorities may require
that provision is made for (cid:145)in-span(cid:146) interconnection (sometimes
called virtual collocation), whereby third parties are able to
interconnect equipment that has been installed in a nearby
location. A study carried out
the Commission has
provided a set of recommendations and practical guidelines
for NRAs and operators on implementation of collocation (17).

for

Regulators will need to address both one-off provisioning costs
and costs for collocation, since these are part of
the total
package for the new entrant seeking to benefit from the avail-
ability of unbundled local loops. The most appropriate way to
recover such one-off costs is on the basis of up-front fixed
charges. Alternatively if costs borne by the incumbent are
recovered over a period, it would be normal to build a risk
factor into the calculated charges.

6. DUTIES OF NATIONAL REGULATORY AND COMPETITION

AUTHORITIES

National regulatory authorities, set up in all EU Member States
by national
legislation adopted in transposition of EC
Directives, are entrusted with the application of sector-specific
is Community policy to
telecommunications regulation.
encourage competition in infrastructure and competition in
services, and NRAs must take this into account when acting.
National regulatory authorities may also consider introducing a
(cid:145)fast-track(cid:146) dispute resolution procedure that will allow disputes
about unbundled access to be settled promptly.

It

(cid:151) pricing of local loops should be compatible with the aim of
fostering fair and sustainable competition, and providing
efficient
incentives in alternative local access
network infrastructure (18),

investment

should ensure that

there is no market
(cid:151) pricing rules
distortion,
in particular margin squeezes between the
prices of wholesale and retail services offered by the
incumbent.

In some cases, these principles may conflict with each other, in
particular in situations where incumbents’ retail tariffs remain
distorted as a result of
imbalances and
continuing constraints on tariff re-balancing. In these circum-
stances, NRAs may have to consider transitional measures that
term while safe-
avoid distorting competition in the short
guarding competition in the long term.

inherited tariff

the provisions of

In the Access Notice (20),

to examination in the light of

EU competition rules continue to apply beside the sector-
like any other public
specific regulation and the NRAs,
authority, are bound to respect
the EC
Treaty (19).
the Commission has
therefore stated that NRAs, when taking decisions on individual
access agreements, have to respect both the sector-specific ONP
rules and the general competition rules. Decisions taken by
NRAs in application of sector specific legislation can be
subject
the EU competition
rules. The same principles also apply as regards national
competition authorities. As concerns public undertakings or
undertakings to which the Member States grant special or
exclusive rights, Article 86 of the Treaty specifically requires
Member States neither to enact, nor to maintain in force any
measure contrary to the rules of
in particular
competition rules. More broadly, as concerns all undertakings,
Article 10 of the Treaty requires Member States to ensure the
fulfilment of the obligations arising out of the Treaty and to
abstain from any measure which could jeopardise
the
attainment of its objectives.

the Treaty,

The NRAs have a particular role to play when defining the set
of conditions and requirements applying to the incumbents’
offers of unbundled access to the local
loop. As regards
prices and costs, while implementing the principle of trans-
parency and cost-orientation regarding access to the local
loops of
the
following principles:

incumbent operators,

they should respect

The Court has in particular ruled (21)
that Article 10
(previously Article 5) and Article 86 (previously Article 90)
of the EEC Treaty must be interpreted as:

that

(i) prohibiting the national authorities from encouraging the
conclusion of agreements on tariffs contrary to Article
81(1) or Article 82 of the Treaty, as the case may be;

(cid:151) costing and pricing rules

should be transparent and

objectively based,

(ii) precluding the approval by those authorities of

tariffs

resulting from such agreements.

(cid:151) pricing rules should ensure that the incumbent operator is
able to cover its relevant costs plus a reasonable return,

(17) See http://www.ispo.cec.be/infosoc/telecompolicy/en/Study-en.htm

January 1999 (cid:145)Recommended practices for collocation and other
facilities sharing for telecommunications infrastructure(cid:146) (cid:151) a study
by Eutelis Consult/Horrocks Technology/Tera Consultants.

(18) This in principle may be provided by a pricing system based on
current costs. Current costs are the costs of building an efficient
modern equivalent infrastructure and providing such a service at
today’s prices.

(19) See Case 66/86 (Ahmed Saeed).
(20) See Access Notice, paragraph 19.
(21) See abovementioned Case 66/86 (Ahmed Saeed), paragraph 58.

C 272/62

EN

Official Journal of the European Communities

23.9.2000

This would also apply to any practice infringing article 82. The
Commission will examine whether Member States, in particular
NRAs or competition authorities, maintain or enact measures
contrary to Community competition rules and thereby either
infringe Article 86 of the Treaty, read in conjunction with
Article 82, or Article 10 of the Treaty, also read in conjunction
with Article 82. In such an event,
it shall take appropriate
action.

7. CONCLUSION

Providing access to the local
loop to all new entrants will
increase the level of competition and technological innovation
in the local access network, which will in turn stimulate the
competitive provision of a full range of
telecommunication
services from simple voice telephony to broadband multimedia
and high-speed Internet services to the customer.

and investment requirements for market players. This will
stimulate the roll-out of high-speed Internet access services to
small business users and consumers, facilitating the growth of
e-commerce and e-business.

In all cases, competition rules apply, and refusals by
loop to competitors
dominant operators to open the local
forms of abuses of
requesting access may imply various
the Treaty, such as
dominant position under Article 82 of
refusals to deal and limitation of production, markets, or
technical development to the prejudice of consumers. Where
fair and non-discriminatory conditions of
access is granted,
access are crucial for successfully opening the local
loop on
the development of a competitive market telecommunications
services, in particular high-speed services. This requires close
monitoring of delays, prices and contractual arrangements
between incumbents and new entrants.

loop identified in
These three means of access to the local
point 2 complement each other and should all be available
as market offerings. Together
to reinforce
competition and improve choice for all users, by allowing the
market to decide which offering best meets users needs, taking
into account the evolving demands of users and the technical

serve

they

confident

is
The Commission
unbundling of
the local
towards more competitive and efficient
markets, and will
internet services.

recommended
the
loop will be a major new step
telecommunications
facilitate the accelerated development of

that

23.9.2000

EN

Official Journal of the European Communities

C 272/63

ANNEX

Technical analysis on access to the local loop

1. MODALITIES FOR UNBUNDLED ACCESS TO THE LOCAL LOOP

1.1. Full Unbundling to the local loop

In the case of full unbundling of the local loop, a copper pair is rented to a third party for its exclusive use. The lessor
will lose control of the relationship with its customer for the provision of communications services, and any universal
service obligations of the lessor will no longer apply with respect to that specific customer.

Examples of use:

Example (i): The customer wishes to change telephone and/or leased line service supplier, and the new entrant uses an
unbundled local loop to take over the subscriber from the incumbent and to provide competitive services.
(As noted above, few new entrants now restrict themselves to a simple telephone service offering of this
type; they prefer to provide broadband data services or a multi-service voice and data offering.)

Former link re-configured

t

Local loop

M
D
F

Incumbent’s 
local switch

To new 
entrant’s switch

Phone network

Phone network

Example (ii): The new entrant uses an unbundled local loop to provide high-speed data service to a customer over a
second line, using any type of DSL modems. The customer retains the incumbent as provider of telephone
services on the first line.

t

XDSL
modem

PC

Local loop

M
D
F

Incumbent’s 
local switch

Phone network

New entrant’s 
DSL access
multiplexer
(DSLAM)

New entrant

Full unbundled access to the local loop will allow competitors to provide their customers with a variety of versatile and
cost-efficient broadband services, based on innovative DSL technologies (e.g. HDSL for 2 Mbit/s leased lines, VDSL for
high-capacity circuits up to 50 Mbit/s, see Table). This will certainly contribute to improve the competitive situation of
leased lines and broadband services in the European Union.

C 272/64

EN

Official Journal of the European Communities

23.9.2000

Table (cid:151) Technologies available for the provision of broadband services (1 copper pair)

DSL, or digital subscriber line, is the umbrella term for a family of technologies that transform the copper local loop
into a broadband line capable of delivering multiple video channels into the home.

There are a variety of DSL technologies and these are generically known as xDSL. Each type of DSL technology has a
unique set of characteristics in terms of performance (maximum broadband capacity), distance over which maximum
performance is maintained (as measured from the switch), frequency of transmission, and cost.

The main digital subscriber loop (xDSL) technologies over one pair of copper wire and some of their technical
characteristics and applications are:

Asymmetric DSL (ADSL) (cid:151) used for fast internet access

Symmetric DSL, (SDSL) and High-speed symmetric DSL (HDSL) (cid:151) used for 2 Mbits leased lines

Very high-speed DSL (VDSL) (cid:151) used for high capacity leased line and broadband services

Further information on DSL technologies can be found at
http://www.adsl.com/adsl_forum.html

1.2. Shared access to the local loop

In this form of access, the notified operator continues to provide telephone service, while the new entrant deliver
high-speed data services over the same local loop using its own high-speed ADSL modems. Telephone traffic and the
data traffic are separated by means of a splitter before the incumbent’s switch. The local loop remains connected to, and
part of, the notified switched network.

Standardisation of ADSL systems have reached a level of maturity whereby international agreement exists on its secure
deployment in the local loops of incumbents (1). In addition, the industry has also worked out commercial solutions for
the interoperability of ADSL systems in a multi-vendor environment (2).

Example: The new entrant supplies the customer with an ADSL modem for connection at his/her premises, and installs
a DSL access multiplexer or DSLAM (which combines ADSL modems and network interface module) on the
incumbent’s premises, under a collocation agreement.

The interface between the incumbent’s system and the new entrant is at point C in the diagram (i.e. within
this case the splitter being installed by the incumbent).

t

ADSL
modem

PC

Local loop

Splitter

Tel.

M
D
F

Data

C

DSL access
multiplexer
(DSLAM)

Incumbent’s 
local switch

Phone network

New entrant

(1) The International Telecommunication Union (ITU) has worked out technical specifications for ADSL full rate (cid:151) with speeds up to
8 Mbit/s downstream and 1 Mbit/s upstream (cid:151) in its Recommendation G.992.1. This includes a number of country-specific variants
in order to accommodate regional local loop infrastructure differences. ADSL can achieve its highest speeds at a distance of 4 km or
less. The connection also allows the provision of voice phone service on the basic frequency band of the same line.
In addition ITU has worked out a variant ADSL solution in its Recommendation G.992.2, also known as G.Lite, that is very easy to
deploy in the customer premises because it is (cid:145)splitter-less(cid:146) (it needs a very simple serial filter that separates voice and data and does
not call for any rewiring at the customer premises). Speeds are up to 1,5 Mbit/s downstream to the user and 385 kbit/s upstream.
Some PC suppliers are already marketing PC equipment with integrated G.Lite-ADSL modems so that standard universal solutions can
be rolled out in a large scale in the residential market.

(2) See the works of the Universal ADSL Working Group (http://www.uawg.com).

23.9.2000

EN

Official Journal of the European Communities

C 272/65

This type of access may provide the most cost-effective solution for a user wishing to retain the telephone service being
provided by the incumbent, but seeking a fast Internet service from an Internet service providers (ISP) of his or her
choice. The ISP has full control of the commercial and technical conditions of the ADSL service that it makes available
to its users.

1.3. High-speed bit-stream access

High-speed bit-stream access refers to the situation where the incumbent installs a high-speed access link to the
customers premises (e.g. by installing its preferred ADSL equipment and configuration in its local access network)
and then makes this access link available to third parties, to enable them to provide high-speed services to customers.
The incumbent may also provide transmission services to its competitors, using its ATM or IP network, to carry
competitors traffic from the DSLAM to a (cid:145)higher(cid:146)
level in the network hierarchy where new entrants may already
have a point of presence (e.g. a transit switch location).

This type of access does not actually entail any third party access to the copper pair in the local loop (but the incumbent
may use only the higher frequencies of the copper local loop in the same way as explained above).

For a new entrant, the problem in exploiting access to unbundled copper pairs is that it entails building out its core
network to the incumbent’s local exchanges where the copper pairs are terminated; in a typical European country this
could number several thousand sites. High-speed access services, when combined with a transmission service that
delivers traffic to the new entrant’s point of presence, can be attractive, in particular in the early stage of the new
entrant’s network deployment, in that it allows the new entrant to deliver broadband service to customers in advance of
its own network build-out. For the incumbent, provision of a high-speed bit-stream service is attractive in that it does
not involve physical access to copper pairs, and so does not hinder the progressive modernisation of the local access
network (i.e. replacing copper by fibre). Many incumbent operators are already providing such services (1).

However, on its own, a service of this type allows the incumbent to retain control of the rate of deployment of
high-speed access services, and the geographical regions in which these service are rolled out. The incumbent’s priorities
may not match those of the new entrants. Such services should therefore be seen as complementing the other forms of
unbundled access described above, but not substituting them.

2. OTHER TECHNICAL ISSUES ON ACCESS TO THE LOCAL LOOP

2.1. Transparency

All the ONP directives contain generic obligations for notified operators to publish prices, terms and conditions for their
network offerings in order to ensure market transparency and non-discrimination.

The recommendation proposes publication of a reference offer for unbundled access to the local loop, covering network
elements to which access is offered, collocation services, operational support systems, supply conditions and prices.
Reference access offerings need to be drawn up and published in a timely and detailed manner, under the supervision of
the national regulatory authority.

The Commission intends to publish, on a regular basis, prices in Member States for unbundled access to local loops, in
the same way as it currently publishes interconnection prices (2).

2.2. Industry cooperation and coordination

Local loop unbundling raises a number of technical and operational issues that are best agreed between the parties
involved, but under supervision of the national regulatory authority to ensure fair treatment. The recommendation
proposes that national regulatory authorities encourage the setting-up of cooperation mechanisms at national
level
involving all interested parties, under the general supervision of the national regulatory authority, to address issues such
as:

(cid:151) spectrum limitations and electromagnetic compatibility (EMC), in order to avoid interference between the various

systems being used on local loops, and interference between local loop systems and radio systems,

(cid:151) operational aspects linked to provision of unbundled local loops (ordering and provisioning procedures and time-
loops, service level agreements, maintenance procedures, problem escalation

technical qualification of

scales,
procedures, etc),

(cid:151) access to operational support systems of the local loop provider,

(1) See indicative ADSL offers from notified operator in Member States at
http://www.ispo.cec.be/infosoc/telecompolicy/en/comm-en.htm#misc
(2) See http://www.ispo.cec.be/infosoc/telecompolicy/en/comm-en.htm#misc

C 272/66

EN

Official Journal of the European Communities

23.9.2000

(cid:151) codes of practice for collocation,

(cid:151) the content of access offerings (i.e., technical product descriptions, line-coding certification, prices of loops, list of
MDF sites, collocation prices, one-stop shopping ordering and maintenance (cid:151) as indicated in Annex I of the
recommendation).

2.3. International coordination

Many of the problems faced in individual Member States are similar across the Community, and there is scope of
interchange of information to ensure that experience and good practice is passed on. The European telecommunications
platform is addressing these issues (see http://www.etp-online.org/).

The recommendation encourages such interaction, e.g. by recommending that national regulatory authorities publicise
national activities in this area, and encourage coordination and information interchange with interested parties in other
Member States.