KPN's Response to the BEREC Public Consultation on the Draft BEREC

BEREC Report on Oligopoly analysis and

regulation BoR (15)74

KPN response

KPN PO Box 30 000 2500 GA The Hague The Netherlands Contact persons: Gera van Duijvenvoorde (gera.vanduijvenvoorde@kpn.com) Paul Knol ([email protected])

Reference: GCO/15/U/053 31 July 2015

Introduction and summary KPN welcomes the opportunity to provide input to BERECs consultation on the Report on Oligopo- ly analysis and regulation (June 2015). BEREC describes the purpose of the report as twofold:

 Provide initial assistance to National Regulatory Authorities (NRAs) under the current regulatory framework on the SMP analysis in ‘oligopolistic markets’;  An assessment whether the future regulatory framework to deal ex ante with ‘oligopolistic markets’ should be amended. In its submission to the earlier BEREC questionnaire on the analysis of oligopolistic markets, of January 2015, KPN concluded that the discussion on ‘the regulation of oligopolistic markets’ lacks an adequate problem definition. KPN considered the concept of ‘oligopolies’ as such too broad and unspecified to build any conclusion upon. After reading the current report KPN is not con- vinced that one should conclude that existing regulation should be applied differently. Nor should a future regulatory framework be extended to regulate oligopolies on an ex ante basis. As described in the report the current framework allows ex ante regulatory intervention only if a sufficient level of proof of single or joint significant market power (‘SMP’) has been provided by the NRA. As for joint dominance / joint SMP the criteria have been defined by the ECJ in the Air- tours decision. There is no need or reason to change the standard of proof beyond or below the general threshold in cases of presumed oligopolies. The description of the standard of proof in the report seems adequate and provides clarity to NRAs. Most of the report addresses potential negative effects of the economic concept of ‘tight oligopolies’ and raises the question whether a new regulatory framework should provide NRAs with new ex ante regulatory powers to prohibit potential negative effects of such markets structures. KPN does not feel that such a need would exist and that such regulatory powers would be beneficial for the development of a competitive EU telecommunications- and ICT-market. The report itself indicates that even ‘tight oligopolies’ in itself do not indicate negative market effects. This results from the characteristics of the markets, such as (i) the dynamics of the electronic communications markets, (ii) the increasing close and converging relations of these markets with other markets in the internet value chain, (iii) the need for a stable and predictable regulatory and investment stimulating environment, (iv) the situation that the interim phase after liberalisation of the market has been ended and no basis for an additional regulatory framework beyond Significant Market Power (’SMP’) exists, and (v) the fundamental principle in the EU Treaty that on the internal market (only) general competition law may remedy market failures. Given the above characteristics no justification exists to extend the current regulatory framework to address insufficiently defined ‘problems’ such as (‘tight’) oligopolistic markets. KPN will elaborate on these points in more detail hereafter. Due to the short timeframes in this consultation KPN mainly focusses on the basic assumptions that are addressed in the BEREC report, taking into account the market situation in The Netherlands. KPN is open to further clarify its view or provide additional information to BEREC, if desired. Hereinafter, we will first (paragraphs 1-3) describe the current regulatory framework and will conclude that the current system of ex ante regulation is temporarily by nature (until no longer single or joint SMP exists) and that there is no need and no legal basis to change the standard of proof. We will also conclude that for a future amendment of regulation the concept of tight oligopolies

KPN response to BEREC Oligopoly analysis 2 31 July 2015

in itself can be no criterion to base any ex ante regulatory intervention upon (paragraph 4). The dynamics in the telecommunications and wider internet markets is insufficiently taken into account to propose specific regulation for the traditional telecommunications market (paragraph 5). Not only the role of OTTs as competitors in traditional telecommunications markets should be more critically be included, but also the dynamic effect that – in two-sided-markets – the role of other players in the internet value chain is a counterweight to potential dominant positions of traditional telecommunication operators. The BEREC analysis fails to investigate incentives that in the current market exist to achieve a wholesale market that is based on commercially negotiated agreements, if necessary complemented with dispute resolution mechanisms (paragraph 6). KPN believes such incentives are present and recent developments in the Dutch market support this view. Finally we will clarify why the merger control test of a ‘Significant Impediment of Effective Competition’ cannot be the criterion to trigger ex ante regulation (paragraph 7) and comment on the complexity and uncertainty of potential remedies in case, nevertheless, some form of ‘oligopoly-regulation’ would be introduced.

Index Introduction and summary ...... 2 1. The current framework and its background – the role of (ex ante) regulation ...... 4 2. Standard of proof for joint SMP ...... 5 3. Sub conclusion on the application of the current framework ...... 6 4. ‘Tight oligopoly’ no future triggering event for ex ante regulation ...... 6 5. Market developments do not support regulation without SMP ...... 6 6. Implicit presumption for the need for ‘regulated’ access overlooks new reality in access arrangements on competitive markets ...... 8 7. Could the SIEC test be relevant for ex ante regulation? ...... 9 8. Remedies in case of joint SMP ...... 10

KPN response to BEREC Oligopoly analysis 3 31 July 2015

1. The current framework and its background – the role of (ex ante) regulation The need for sector specific regulation in the telecoms sector found its origin in the historic (state owned) monopolies. After opening up the fixed telephony networks with the Open Network Pro- vision framework of the 90ies, the ‘1999 review’1 chose to regulate previous monopolists on an ex ante basis as long as they still would enjoy dominant positions as defined under EU competition law. This ‘SMP-regime’ was defined to end once (single or joint) dominant positions (as defined in competition law) are no longer present. These dominant positions resulted from the fact that these incumbent operators rolled out their local access infrastructures protected by exclusive rights and would have been able to fund investment costs through monopoly rents. The point of departure of this regulatory framework is that the market will rely on the application of general competition law only after this situation is achieved. Good reasons for such a ‘sunset clause’ existed in the past and still do exist. The basics of the European Union is a free market, in which – solely – competition law fulfils the role to safeguard the competition on the market and to avoid negative consequences of (tacit) collusion and unilateral abuse of dominant positions. In the free market it is up to undertakings to compete for customers. Desired market structures are not defined upfront, but the result of market forces, which will change over time. Regulatory intervention is an exception that is – and should be – used as an ultimate remedium and not as a regular tool to shape markets in line with economic models or (politically) desired outcomes. Many sectors, including sectors adjacent to the telecommunications sector in the converging internet value chain, have shown (and may increase to show) tendencies where the number of competing companies is limited. This especially holds true for markets where high initial costs, network effects, or scale for innovation are relevant characteristics. It is very important to note that the telecommunications sector in many ways is competing with sectors and companies in the internet value chain, not in the least in the ability to externally finance investments or attract equity. Many new applications and services from other players in the internet value chain increasingly compete with the former telecommunications services, without being in scope for potential ex ante regulation or the oligopoly analyses in the BEREC report. Like all parts of the internet value chain, the telecommunications sector has been under constant and increasing change in the last decade and most of these changes point at contradicting direc- tions: strong decrease of revenues through traditional services on the one hand, against the need to increase investments to cope with the rapidly growing demand for high speed data networks on the other hand. The predictability and stability of the regulatory framework is crucial to be able to meet these challenging market requirements. The choices made in the 2002 European Regulatory Framework aimed to achieve this goal by de- fining a strict criterion for ex ante regulation: ‘significant market power’ (SMP), based on the competition law dominance concept. As long as SMP would be present in the market stricter rules than under competition law – where only abuse thereof is sanctioned ex post – would apply. Once the markets would qualify for this ex ante regulation only the general competition law principles would apply. We acknowledge that the concept of ex ante application of competition law principles and market definitions is increasingly complex. Not because the framework itself is insufficient, but because of the continuously evolving and unpredictable market developments. In this sector this does not only create a difficult task for regulators, assessing SMP in a ‘prospective analysis’, but at least as much for companies active in the market deciding on investments and innovation. Taking into account the fact that companies are confronted with different or quicker market developments than expected, it is no wonder that also NRAs are struggling with predicting the outcome of future

1 Which led to the current regulatory framework of 2002.

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developments. They both realise the limited value of their ’crystal ball’. That should make regulators cautious as regards to impose remedies based on ‘forward looking’ market predictions. So, rather than presenting a proposal to extend ex ante regulation to only some market players in the internet value chain, the current state of play should lead to the conclusion that such regulation should be critically reviewed and where possible limited in scope in order to not disturb the competition of all players in the internet value chain.

2. Standard of proof for joint SMP The BEREC report implies that it is difficult for NRAs to meet the standards of proof – as defined by ECJ jurisprudence – for joint or collective SMP. This is true. As stated above the ex ante regulatory regime is an exception to the general EU principles and – as with all exceptions – should not be interpreted extensively. The burden of proof as required for the same concept in general competition law should not be lowered in case of ex ante application. KPN agrees with the conclusion of BEREC (p. 48) that the standard of proof for joint SMP should not be different for regulated and unregulated markets. This standard should not be lowered to a (only or mainly) hypothetical analysis, but should continue to be a factual analysis. If this level of proof is found to be complicated by NRAs, the conclusion must be that no justification for additional regulations exists instead of imposing ex ante regulation without fulfilling the SMP criterion. The notion of complexity raises the probability of false positives in ex ante regulations. As annex to its earlier submission of January 2015 KPN attached two notes of RBB Economics that describe the relevant standard of proof that an NRA should provide before being able to conclude on (a risk of) joint SMP. In these notes RBB Economics specifically addressed the potential issues for tacit coordination (as one of the three necessary elements to be proven) in the situation of fixed network competition. The notes describe the (economic) consequences of the fact that different technologies in networks – and therefore different investment needs and timing – are a clear counter indication for a potential joint SMP. In its ‘serious doubts’ letter to the Dutch NRA of 30 April 20152 the European Commission confirms this analysis (underlining added by KPN):

‘ACM has insufficiently proven how the asymmetry of technical possibilities would work in practice and allow tacit coordination, particularly, because ACM's reasoning would imply that (i) both KPN and UPC/Ziggo would be likely to stop their current network upgrades altogether for fear of triggering upgrades from the other party, which seems implausible given the current roll-out plans by both companies, as well as the fact that cable upgrades cannot be done geographically but on the entire network; and (ii)KPN and UPC/Ziggo would tacitly coordinate their upgrades to the network so as to maintain the existing balance of technical possibilities between the two networks which is likely to be very difficult in practice. ACM's view on the impact of innovation on the potential tacit coordination between KPN and UPC/Ziggo is also unconvincing. The fact that innovations are developed by outsider companies implies that they are likely to be hard to predict and controlled by telecoms companies. Thus, there is a possibility that the parties could surprise each other with the implementation of technical innovations that can change the playing field unexpectedly (as the parties do not control the innovation process, either individually or jointly). In particular, ACM has not explained why a party would not have an incentive to implement a technical innovation providing a competitive advantage and reap the benefits of that competitive advantage (to the detriment of the other party). To show that the market is transparent and facilitates coordination, ACM should have assessed the impact of the increasingly important competition in bundles on transparency and the likelihood of coordination. In this regard, access to content for their TV offerings is an area where KPN and UPC/Ziggo appear to naturally differ from each other, as there seems to be many different TV content offerings available for both companies, allowing for significant product differentiation, and UPC/Ziggo is likely to have traditionally more experience with content acquisition and distribution, hence a potential first mover advantage.’

2 European Commission Letter to ACM, 30 April 2015 (C(2015) 3078 final),CASE NL/2015/1727: Whole- sale local access provided at a fixed location in the Netherlands Opening of Phase II investigation pursuant to Article 7 of Directive 2002/21/EC1 as amended by Directive 2009/140/EC.

KPN response to BEREC Oligopoly analysis 5 31 July 2015

Herewith the Commissions confirms that an assessment of joint SMP can only be accepted when the relevant criteria on the collective dominance concept in accordance with jurisprudence and literature under the competition law concept is fulfilled. This seems the only proper conclusion.

3. Sub conclusion on the application of the current framework So, to the opinion of KPN there is no justification to change the current framework or use a different interpretation of existing concepts. In so far as BEREC is trying to help NRAs in appropriate application of these concepts the report may be of value and present more clarity. In so far as BE- REC tries to extend the underlying concepts for SMP, KPN strongly disagrees. In the following paragraphs we will further investigate whether such an extension could be defended for the future regulatory framework.

4. ‘Tight oligopoly’ no future triggering event for ex ante regulation As recognised in the BEREC report, the literature on oligopolies acknowledge that – even tight – oligopolies in itself do not constitute a problem or a market failure. The report concludes however that ‘some’ tight oligopolies may have negative impacts for consumers because they could lead to a ‘subcompetitive outcome’ or to a ‘non-effective market outcome’. However, the report fails to present clear descriptions how to define such ‘non-effective’ outcomes and how to distinguish oligopolies in types that do and types that do not create the hypothetical negative outcomes. Therefore we strongly believe that the concept of tight oligopolies in itself can be no criterion to base any ex ante regulatory intervention upon. Nevertheless we will address some of the problems associated with a proposal in that direction further. The report also fails to be more precise on the ‘market failures’ that would be the result of ‘tight oligopolies’. Telecommunications (network) markets are characterised by high investments and sunk costs and very low marginal costs. The economic theory, claiming that in a competitive market prices reach marginal costs, can therefore not be applied mechanically to telecommunications tariffs. If all prices would be at marginal cost no additional investments and innovation would be possible, as has been recognised by NRAs that tend to use different (e.g. LRIC) costing concepts, but even on those concepts many discussions are ongoing. In other words: there is no easy criterion to define when tariffs are to be considered ‘market failures’ and when not. Therefore there are no ways to define precise enough a new regulatory trigger for ex ante regulation.

5. Market developments do not support regulation without SMP The BEREC report is mostly focussing on the telecommunications market as a market in itself, without analysing properly the internet value chain and external competitive forces. Different from many more traditional and static markets, the telecommunications market has developed from a separate market, to a market that is part of an extremely dynamic ‘internet-eco-system’, where a lot of different (financial, technological and market) factors are influencing the role and position of the various market players. These markets can often be described as ‘two-sided- markets’, which – also from an economic point of view – require a very different analysis com- pared to more traditional markets. For example, the ‘need for speed’ that creates the primary incentive for the increasing need to invest in high speed NGA networks is not so much created by the marketing power of telecommunications companies, but much more by companies introduc- ing new devices (e.g. Apple, Samsung), capacity and speed dependent services (e.g. Google/Youtube, Netflix), competing services (e.g. Microsoft, Whatsapp, Amazon Cloud), etc. All these well-known examples, and many others, come from companies and sectors that are often far larger, active in markets sometimes at least as oligopolistic and so far totally unregulated. Impos- ing remedies in a situation without SMP on a selection of players on these markets will not only

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distort the competition between regulated and non-regulated players on the markets, but possibly also between the players on a presumed ‘tight oligopoly’ market, as regulation may influence their individual possibilities to compete or innovate. In these situations it is an impossible task for NRAs to find a non-distortive, proportionate and balanced remedy. Although BEREC makes some references to the fact that traditional telecommunications (services) markets are influenced by competition from other (‘Over-The-Top’) services from different players in the internet value chain, in general the report neglects these market dynamics and thereby the analysis cannot be considered to be convincing for any conclusions to support additional triggers for ex ante regulation. For example, the report does not show how two ‘tight oligopolistic’ players in one domestic market can arrange between them such deals as successfully keeping out the in- fluences of Netflix, Youtube, Amazon etcetera outside their national market, nor does the report address the risk that any possible remedy on one or more of the tight players may introduce new forms of possible competition problems. KPN acknowledges the concept that ‘network access’ is a prerequisite for using all devices, applications and services. In this respect the traditional telecommunications networks play a central role (albeit as a commodity). KPN, however, believes that the economic reality is much different from the static view that these traditional ‘bottlenecks can hamper competition’. The existing horizontal regulations – including interoperability obligations and in the Netherlands (and soon also in the EU) net neutrality legislation – influence already most of the potential problems that could occur in the internet value chain and shifts the economic powers much more than in the past to other parts of the value chain, with the risk of placing the needs for investment to grow capacity entirely on the shoulders of a ‘commoditized’ telco community. Commoditization is a trend telco’s have to live with, but NRAs misinterpreting this trend and applying utility-type of regulatory analysis carry the risk of becoming a real threat for achieving the goals of the single market and alienating the financial communities. It is not at all clear how BEREC sees these very dynamic forces on the inter- national and EU market – and the effects of the existing horizontal regulation – influence the position of the traditional access and market regulation discussions. KPN is aware that without a criti- cal analysis of these facts and market forces no conclusions could be drawn on the necessity, effec- tiveness or (even) damaging effects of additional regulatory powers. Apart from this, we comment on the presumption that the traditional telecommunications market is characterised by ‘high entry barriers’. This may be true if one takes the view that only national operators are able to compete on equal terms. The market reality nowadays, however, is quite different. Apart from national fixed operators – in the Netherlands there are two parallel national fixed networks – the more recent development is that on the fixed network markets a large variety of local or regional (mostly fibre) network initiatives have been started. Furthermore the traditional networks (mostly based on a history of transporting either TV programmes or telephony) do not have a topology that always qualifies as the most efficient for the new data-centric or internet based market. Other network operators – although maybe small in geographic scope or addressa- ble ‘customers’ – are building (fibre) networks that specifically address the needs and requirements of these new (and future) markets. They are often organised locally as a joint initiative to create a local electronic market place with an open wholesale model for service providers and a high quality connectivity to the world wide web to support a large variety of open but also secure applications. The same developments can be seen in network markets for specific business services, business areas, mobile networks etc. etc. And on top of that, more and more (internet)- traffic is directly switched to the networks of the major players in the internet value chain (former ‘content providers’) that have by now extensive own worldwide networks into most countries. These parties thereby effectively take over large proportions of traffic that were previously sent over traditional telecommunications operators networks and are also able to control the content and the competition on downstream market on which the traditional telecommunications companies compete with their multiplay offers. The ‘access networks’ still remains visible in the consumer market as a presumed bottleneck, but more and more alternatives are available for the predominant use in the future: internet access.

KPN response to BEREC Oligopoly analysis 7 31 July 2015

National and as well as innumerable local WiFi initiatives, mobile networks and other access technologies become more and more available and substitutable. On mobile networks there might be a barrier for national entry due to scarce spectrum, but that is an issue that should be solved by adequate spectrum management and releasing more spectrum, not by adding regulation. When discussing the ‘High entry barriers’ and ‘High level of product differentiation’ (p. 50 of the report) it seems that BEREC takes a look at the supply side of the market only. On the internet market the role of a specific network offer (and its specific technology) is becoming quickly less relevant: devices, applications and ultimately end-users select the relevant access technology for the intended use, and the role of the access provider or access technology becomes increasingly less relevant. It is necessary to take a dynamic view on the (demand side of) the market when discussing a new regulatory framework. KPN doubts whether the criteria mentioned by BEREC will be sufficient to assess the concept of tight monopolies. For example, how can NRAs determine that the companies who are part of a presumed tight monopoly can behave independently from their competitors, suppliers and customers? But also, how do they take into account the factors mentioned in the report such as capacity constraints and product differentiations as part of this assessment while also taking into account the complex interdependencies in the internet value chain? All these effects lead to a much more diffuse market, where oligopolies might still – for some time – be seen by those that only look at traditional numbers of customers, but not at market realities.

6. Implicit presumption for the need for ‘regulated’ access overlooks new reality in access arrangements on competitive markets Underlying much of the reasoning in the report is the presumption that regulatory intervention is needed to secure alternative operators to be present in the market and thereby prohibit possible negative effects of tight oligopolies. KPN questions whether this presumption has sufficiently been investigated. The Dutch mobile market is an example where unregulated wholesale access has been available since 19933. All mobile operators4 are offering wholesale access to MVNOs in a variety of types of access services. According to ACM’s quarterly Market Monitor currently 20-25% of retail subscriptions are offered by MNVOs. Even at the time of two respective mergers (KPN/Telfort and T-Mobile/Orange) that brought the number of networks from five to three, the relevant competition authorities saw no reason to ‘remedy’ the smaller amount of network operators on the network market with manda- tory access services. And they were right not to interfere, since the market has shown no decrease of the number of MVNOs and their markets share, but an even larger variation of commercially negotiated access agreements. Even on fixed – where the Dutch market has an almost unique structure of nationwide network competition in consumer as well as business markets – KPN is of the opinion that wholesale agreements should take precedence over regulated access. In the dynamics of the current telecommunications (network) markets high investments are needed to continue upgrading networks to quality and speeds that can meet the requirements demanded by new services and applications. There is no indication that this trend is changing. Thereby no operator can allow itself to lay back. All operators have to continue investing and innovating, and securing sufficient returns to justify the cash expenses thereof. Since turnover and returns are based on use, the operators will try to get as many customers on its networks and – as shown where network competition occurs – at least one of the competing networks includes forms of wholesale access to its portfolio to acheive

3 Even prior to start of GSM, at the time when KPN was still a monopolist on (analogue) mobile services. 4 Currently three: KPN, Vodafone and T-Mobile, with Tele2 (having been a full MVNO itself for many years) has announced the launch of a fourth LTE mobile network H2 2015 (based on the licences it acquired in auctions in the past).

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this goal, since wholesale arrangements bring incremental revenues from customers that would otherwise be lost to the competing network. Typically these wholesale deals have a clause on offering in the future new and upgraded network services to the wholesale partner as well (next to the own retail customers) and charging for these services create extra income since the investments done are recouped over the wholesale base as well. KPN itself has stated on many occasions that it is acting on an ‘open wholesale model’, which it has also demonstrated over time by offering and delivering additional wholesale services that were not mandated by regulation, but by actively negotiating with alternative operators. The con- fusion may be that an ‘open wholesale policy’ does not necessarily mean that an operator will actively support all (technical) types of access services that NRAs tend to mandate, based on often hypothetical and rather static views of the market (such as a ‘ladder of investment’, that by now has been proven to be a theoretical rather than a practical concept). The concept of physical unbundling for example has been invented and mandated by regulation, but increasingly has become a barrier for network upgrades, since some new technologies (such as VDSL and vectoring) cannot be combined with traditional unbundling. Network operators will therefore strive for wholesale agreements that will not limit their flexibility to migrate and upgrade their networks to the most efficient technologies. Rather than seeing this as a refusal to negotiate open wholesale agreements, this is a necessary precaution against situations that ‘host’ and ‘guest’ will be entan- gled in internal debates while competing networks are running away with customers.5 For any future regulatory access regime KPN therefore promotes an approach in which commercial agreements would take precedence over the current ex ante detail regulation. Appropriate dispute settlement mechanisms and ex post competition law are able to deal with market distortions, especially in markets with network competition and where no SMP (according to the right standard of proof) can be established any longer. NRAs should make sure that they can deal with the re- sourcing and knowledge requirements of an ex post competition law environment instead of rely- ing on extending their comfort zone of the current ex ante regulatory framework indefinitely.

7. Could the SIEC test be relevant for ex ante regulation? BEREC refers to the introduction of the test of ‘Significant Impediment of Effective Competition’ (SIEC) in the assessment of mergers under the EU merger control regulation. It would, according to KPN, be inappropriate to use this development as supportive for the introduction of regulation of ‘tight monopolies’ in ex ante regulation. An assessment of a merger is only related to the effects of the merger itself on the market. This also applies to the use of the SIEC test: the trigger for the assessment is the merger and any possible effects of the merger on the markets. Market structures as such are not subject to the merger control test. Moreover, the merger regulation application leaves much more flexibility to define specific markets than the ex ante framework (with prede- fined ‘telecommunications’ markets) allows for. Thereby the SIEC test differs from a ‘tight oligopoly’ test aimed at assessing market structures in itself, without any specific triggering event, as BEREC also recognizes in the report. Filling the presumed gap in the ex ante regulatory framework, by using the way SIEC was meant to fill a certain gap in merger control regulation, fails a sound legal basis in the current regulatory framework. Annex II to the Framework Directive, mentioning the criteria for a collective SMP, is an explanation of the required assessment mentioned in Article 14 of the Framework Directive where the NRA must assess whether companies alone or together are able to behave independent from competitors, customers and consumers. Annex II does not refer to the SIEC test in Merger Control regulation.

5 KPN refers to its wholesale website for more information on the open wholesale offer. See http://www.kpn- wholesale.com/media/628929/20150724_vula_amendement_referentieaanbod_v1.0.pdf and http://www.kpn-wholesale.com/media/628902/20150715_vula_wba_annex_4__tariff_schedule__final.pdf.

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But also any future amendment or introduction of the use of a SIEC-test in an ex ante regulation will be problematic. In the merger control process, the test may lead to any specific remedies to be imposed only on the merged entities while under ex ante regulation the possible remedies will be imposed on a group of companies which are selectively determined. Selective as regards their possible behaviour and impact on the market but also as regards the competitiveness in relation to other players in the internet value chain and future restraints in the competitiveness due to selectively imposing remedies. This selective approach is not in line with the concept of the internal market and the role of competition law, as well as the concept of equal treatment in the EU Treaty. KPN therefore concludes that neither a ‘tight oligopoly’ in itself, nor the application of some form of SIEC test is an appropriate a new trigger for the application of ex ante regulation, which would have profound impact on the market. If a different threshold for ex ante regulation would be considered in the upcoming review, it would only be reasonable to have a test stricter than the joint dominance test under competition law. Since ex-ante regulation in itself (by not requiring anti- competitive behaviour as a prerequisite for application) already leads to stricter rules than ex-post competition law, a triggering event that would be even further out of control of potentially regulated companies – such as presumed risky market structures – would be totally disproportionate.6

8. Remedies in case of joint SMP As has been put forward above, the joint SMP or tight oligopoly concept proposed by BEREC gives NRAs no guidance in assessing the adequate and proportionate remedies to be imposed. In both concepts the markets will be still characterised as competitive, which means that any remedy to be imposed on a certain group of market players will distort the competiveness on the market and within the internet value chain. Even if BEREC would give additional guidance to NRAs to assess the concepts of joint SMP and tight oligopoly, the NRAs will be confronted with an almost impossible task to choose the right remedy without hindering future competitiveness, innovation and investments. What is to be considered a necessary and proportional remedy towards both other companies designated as falling under joint SMP or tight oligopoly and other companies in the internet value chain? Also from this perspective KPN fears that an introduction of new oligopolistic concepts in the current ex ante regulatory framework would hamper the future development of the electronic communications markets and create uncertainties which are contradictory to the original aim of ex ante regulation: temporary but predictable regulation of SMP-situations still existing after the liberalisation of these markets. The tendency to rely on regulation to safeguard access in markets with competing network infrastructures also overlooks the fact we have entered a new era where voluntary access arrangements may give market parties a tailored and predictable environment to compete, innovate and invest in order to meet existent and future demands of customers for advanced electronic communications services.

6 Also BEREC acknowledges the difference between the two instruments (SMP and SIEC) when it states that it does not propose a direct transposition of the SIEC-Test to the ex ante regulatory framework since ‘assessing existing market structures using a prospective view (as it is done in ex ante market analysis) and assessing the impact on competition of a proposed merger or acquisition are different tasks, and criteria and tools used in each of these contexts may differ.’ (paragraph 7, pages 55 and 56).

KPN response to BEREC Oligopoly analysis 10 31 July 2015