Orange Belgium slams regulator’s draft ruling on cable wholesale access

Orange Belgium has called for “material improvement” in new wholesale cable tariffs included a draft ruling by the CRC, which groups together several Belgian regulators.

Orange complained that the draft, which has been submitted to the EC for approval, would undermine its strategy of offering a convergent offering.

It said that the draft implies a shift in the way cable operators have to calculate costs in opening up their networks that is apparently intended to prioritise fibre deployment rather than reducing the price of internet and TV services for end customers.

Orange said that earlier proposals had called for cable wholesale charges to be reduced on the basis of a cost-plus-reasonable margin calculation, but that the draft submitted to Brussels calculates costs “as if the cable operators would deploy a new network”.

“This change results from an explicit intention to artificially increase the wholesale tariffs beyond their fair value to the detriment of the end customers, with the objective to support FTTH rollout,” said Orange.

“Should the European Commission confirm this towards the final decision, this would result in the extension of an unjustified deadweight effect to the benefit of the cable owners. This monopoly rent will be paid at the end of the day by Belgian customers.”

Orange said the proposal as it stands would risk undermining its goal of offering consumers “a qualitative and attractive Internet and TV alternative, to improve the quality of service; and to better answer to an unmet need of the market for internet only offers”.

The EC has until May to take a position, which must be incorporated into any final decision by the CRC.

Analysts at Jefferies agreed that “the regulator’s focus has shifted to encouraging infrastructure deployment rather than resale” and that, if adopted, the most likely outcome would be cable wholesale prices that remained stable or even increased, and could be 20% higher than prices proposed in July last year.

Jefferies said that if the regulation is implemented as notified to the EC, “the commercial viability of [Orange’s] cable project looks damaged.

While Orange was likely to continue to develop a converged offering on cable, the new rules could mean that it “might well run this business at a loss”, the analysts said.

The latest twist in cable wholesale regulation comes against a background of an apparent roll back on the enforced opening up of cable networks in the Benelux. In March Liberty Global and Vodafone’s Dutch JV VodafoneZiggo secured a legal victory that overturned a previous regulatory ruling requiring it to open up its cable access network to third-party providers.

The group won an appeal before the CBb business appeals tribunal that overturned markets regulator ACM’s open-access ruling.

Jefferies said at the time that this ruling would be unlikely to have an impact in Belgium, because he Dutch regulator used a ‘joint dominance’ logic, while the Belgian regulation is based on dominance in separately defined markets.”