Ficora sticks to BU LRIC in fibre access regulation

Ficora sticks to BU LRIC in fibre access regulation

The Finnish telecom watchdog, Ficora, published new draft SMP decisions on fixed access (Markets 3A and 3B) on 11 December 2017. Ficora was obliged to redraw the decisions after the European Commission expressed its “serious concerns” over the previous draft decisions during the notification in July. Regarding fibre access, the Commission focused on two critical shortcomings:

  • BU LRIC is a harsh cost accounting method in a market that has not been fully established yet
  • Ficora’s assumption on full coverage of fibre networks was erroneous and was likely to distort the results

Despite the Commission’s concerns, Ficora decided to stick to BU LRIC in cost accounting. However, Ficora changed the assumption on fibre roll-out to better reflect the reality. In particular, the model no longer assumes full fibre deployment within the SMP areas; instead, the model’s cost accounting focuses on areas where fibre networks are available currently. As a result, the cost base in the model reflects the actual availability of fibre access better than earlier. The proposed new price ceilings are 17  €/month for Elisa, 27.50 €/month for Telia and 13.50 €/month for DNA; especially Telia and DNA face lower price ceilings than earlier due to the change in the cost accounting assumptions. The Commission would have opted for so called Economic Replicability Test (ERT), a kind of ex ante margin squeeze test, to ensure better investment incentives during the technological shift from copper to fibre.

Within copper access Ficora’s proposal was to lift ex ante price regulation but the Commission was reluctant to believe that prices would remain stable and reasonable without regulation. Ficora’s new proposal is based on a sort of voluntary price ceilings; the SMP operators are committed to not increase their wholesale prices in copper access within the next three years. Price regulation in the new draft decision is conditional and will be applied only if an operator fails to adhere to the agreement.