The Ovum View: Cable as DSL competitor? No, says the EC (part 2)

Both of these factors will in turn be bad news for consumers, who will feel the brunt of this decision in the long term. First, incumbents weary of unbalanced and heavy regulation will be reluctant to roll out new services aggressively if they know they will immediately have to open the services up to their competitors, as at present. This will stifle innovation and investment by incumbents.

In addition, competitors' lack of access to alternative local networks will continue to limit residential service providers to using bitstream services from the incumbent, which usually result in homogeneous products at the retail level. Thus, innovation from competitors will also be undermined. The result will be a market with low growth potential, little price competition and little innovation, especially for residential customers.

There is another way, however, suggested by the Commission's own goal of technologically neutral regulation.

This approach would simply define the market for wholesale broadband internet access as at present but with no guidelines on what technologies are to be considered part of it. (The only proviso might be to restrict it to broadband access at fixed locations, thus excluding 3G, as the Commission has already decided elsewhere that fixed and mobile services constitute separate markets.)

This would then allow individual regulators to analyse the relevant market in their member state, including in the analysis whatever technologies are relevant. In Sweden and Italy, this would include analysis of Ethernet over fibre technology, which has already been deployed to serve hundreds of thousands of end users. In the UK, the Netherlands and other countries, this analysis would include cable modem technology. In countries where DSL is, in fact, the only technology in use, it would be the only technology included in the analysis.

This approach would allow each regulator to make the appropriate decisions for its own market, rather than ignoring the actual market situation to fit in with the Commission's definitions. If cable modem use is proving popular in a given market, and the cable operator(s) constitute dominant undertakings under the new framework, they should be regulated in the same way as dominant copper loop operators. Where DSL is the only relevant technology, as the Commission suggests it is throughout the EU, the result would be the same as under the Commission's current proposal.

At the time of writing, the Commission has not yet published its final recommendation on relevant markets, and so there is still time for a change. We hope to see this change put in place, and the Commission's commitment to technologically neutral regulation applied in the most obvious area of the market.

If this does not happen, and if the recommendation is enforced in individual member states, the Commission may well find that it has damaged the broadband internet market in a way that will take some time to repair. The same principle applies outside the EU as well.

This research is taken from the Access@Ovum Advisory Service. For more information email info@ovum.com or visit www.ovum.com/research