The Swedish telecom watchdog, PTS, is about to make a significant change in product market definition in fixed access market: it is putting fibre and copper access into separate markets. In PTS’s view, the two products have become so different from each other and are used for so different purposes that they no longer exercise any significant competitive constraint on each other. Increasing use of capacity-hungry services, such as IPTV, web-TV, cloud services and IoT, is driving a wedge between the two forms of broadband. Copper-based xDSL has become clearly inferior to fibre. Among other analyses, PTS follows the ideas of the well-known SSNIP test and concludes that a 10% increase in fibre prices would not lead to redirection of demand from fibre to copper. Since the same is true the other way round, fibre and copper are not interchangeable and thus they are not in the same product market.
The standard approach in SMP regulation, also within the guidelines of the European Commission, is to assume that fibre, copper and cable TV all belong to the same market. Further, advancement of mobile broadband can make it part of the same market. PTS does analyse interchangeability between all of these options but concludes that currently only fibre and cable TV belong to the same market. Still in the previous market review in 2015 copper-based xDSL was part of the same market but not any more.
In sum, PTS is narrowing the product market. Often this increases likelihood of finding an SMP operator since there is always an SMP if one defines the markets narrowly enough. PTS finds Telia as having an SMP position both in fibre and copper markets and is expected to impose obligations on Telia’s wholesale services. However, in the draft version published on 18 June PTS focuses on market definition and SMP assessment only; it will proceed to setting of obligations only in late 2018 or early 2019. Under the current regulation Telia has to follow price regulation in copper access and non-discrimination obligation in fibre access.
PTS’s draft market review is available at https://pts.se/sv/dokument/remisser/telefoni–internet/2018/inhamtande-av-synpunkter-pa-forslag-till-marknadsavgransning-trekriterietest-och-smp-bedomning-for-lokalt-tilltrade/