EoO or EoIand

is there another way to prevent

discrimination? BEREC roundtable on Equivalence of Inputs

Bruxelles, April 29th 2014

EoO proved ineffective in ensuring technical non discrimination in Italy

• EoO implementation started in 2008 following Telecom Italia’s undertakings, to avoid sanctions for discriminatory behaviour in activation of services

• In 2009, TI undertakings were transposed into remedies within the second round of analysis of markets 1, 4 and 5

2

• EoO does not involve the use of the same processes and interfaces the vertically integrated incumbent operator uses internally for activation and fault repair

• After 5 years, experience demonstrates that the retail arm of the vertically integrated incumbent operator enjoys a de-facto preferential treatment, in terms of lead-time and effectiveness for activation/fault repairIncentives and capability to

discriminate not eliminated!

Discrimination is in-built in the EoO approach: line activation

TI Retail

Open Access

TI Wholesale Final customerAltnets

Final customer

BT Retail

Final customer

Final customer

Altnets

Openreach provides wholesale services to internal and external customers through the same processes and systems, on the same timescale

4 In Italy, different processes and systems are used for the activation of wholesale products: Altnets orders have to be processed by TI Wholesale first, resulting into increased lead-time compared to activation for TI’s retail arm

Open Access

Provisioning leadtime for Altnets

Provisioning leadtime for TI retail

Lead-time for Altnets activation further increased by the “two-step“ process

PG. 4

Two step activation process: longer time and higher complexity

TI sends its technician to configure the line and activate it

TI sends its technician to configure the line

After line configuration by TI, Altnets’ technician steps in and activates the line

The inability to control the activation process end-to-end is a

huge issue for Altnets, especially in the transition to ultrabroadband

services

Activation for TI prospect customersActivation for Altnets’ prospect customers

Activation leadtime - TIActivation leadtime - Altnets

The use of different databases and interfaces leads to further rejections of requested activations

• Altnets recently found out that the database through which they get information on whether a prospect customer is reached by a TI line -and therefore whether the service can be provided through LLU or WBA- was incomplete for about 10% of available lines.

• Fastweb filed a complaint on rejections by Telecom Italia for «impossibility to provide ADSL services for presence of MUX equipment» on which TI had activated ADSL clients. The outcome was that in over 20% of cases, there was a «disalignment of databases» which led to the unjustified rejection.

• In many cases, Altnets have not been able to activate a service for a prospect customer because the system did not detect the presence of a copper line in their premises, whereas TI was able to connect the same customer having a more complete database available

The use of different databases between TI retail and Altnets has led to a significant part of the market not to be

addressed by competitionPG. 5

Telecom Italia fault repair is always “first time right“, whereas for Altnets it may take several field interventions, as part of the access network is under the responsability of Telecom Italia and other under the responsability of Altnets

FW

TI

Fault in Altnet’s

part of the newtork

fault in TI’s part of the network

Second field intervention

Fau

lt r

ep

air

fo

r TI

cu

sto

mers

Fau

lt r

ep

air

for

Alt

nets

cu

sto

mers

TI FW

First field intervention

TI

If the fault diagnose was wrong in the first intervention

Discrimination in fault repair

First intervention

Not even EoI can resolve this kind of discrimination

FWCheck

Strategic use of internal/external workforce

Aprile Maggio Giugno0

20

40

60

80

100

Milan – average time for fault repair

hh

Aprile Maggio Giugno0

20

40

60

80

100

Sicily – average time for fault repair

20122013hh

Telecom internal

workforce

External workforc

e

Telecom internal

workforce

External workforce

Telecom Italia extensively uses external contractors for activation and fault repairWhen TI uses external contractors to activate and repair Altnets line, Altnets can hire the same contractors and simplify/speed-up their activation/repair. Telecom Italia is increasingly and strategically witdrawing the use of external contractors for activation and fault repair of the Altnet lines in specific areas, thus affecting the quality of services that Altnets can offer to their customers

After March 2013 in Milan and Sicily, upon the elimination of external workforce for the fault repair of LLU lines, average time to repair a

fault for Altnets has doubled

Persistent discriminatory behaviour recognized by competition authority The Italian Competition Authority launched an investigation to TI discriminatory behaviours in June 2010.

The complaint concerned the high number of rejections of Altnets’ requests for activations of wholesale access lines to provide services to end users (technical boycotting)

AGCM found that from 2009 to 2011:• TI had unfairly rejected a number of requests for

activation of wholesale services• TI treated requests coming from other operators in a

discriminatory manner compared to those originating from its internal divisions by obstructing competitors' access to its infrastructure and making service access activations significantly more difficult

AGCM imposed a €88.2m fine on TI

The ineffective or delayed fault resolution is the major reason for customer churn

9

Fastweb customer churn (customer that have experienced a fault)

Fonte: Dati Fastweb

1,80%

3,20%

4,80%

Guasto risolto < 72 ore Guasto risolto > 72 ore Guasto ripetutoFault solved <72h

Fault solved >72h

Multiple faults

Unbundling of fault repair and activation services is feasible, easy and cost effective• Incumbents in many countries already outsource

these services to external contractors• Unbundling would simply involve the capability

for the Altnet to negotiate contracts directly with the certified technicians and manage activation and fault repairs end-to-end

Providing the Altnets the capability to manage end-to-end the activation and fault

repair processes is the real answer to technical discrimination issues

Incumbent MDF NTP CPE

segment of access network under the responsibility of incumbent

segment under the responsibility of Altnets

CABINET

ONE CONTRACTOR CARRIES OUT THE FAULT REPAIR ACTIVITIES END-TO-ENDUNBUNDLING OF

ACTIVATION/REPAIR

ACTIVITIES PERFORMED BY INCUMBENT WORKFORCEEXISTING APPROACHACTIVITIES CARRIED

OUT BY ALTNET

CUSTOMER PREMISE

Unbundling of services for SLU is even more critical

No need for intervention at MDF (less security issues)

No impact on incumbent workforce (the percentage

of SLU activation/repair will be 5% of total activities)

Effectiveness and quality in the activation of

ultrabroadband services will be key

in stimulating the market!!

Fastweb is currently engaged in a massive migration of its customer base to SLU-based services, to enable ultra-broadband services to existing and new customers

Lessons to be drawnIn Italy EoO has proved to be:

• Ineffective: as discrimination by the SMP operator has been persistent under EoO regime;

• Expensive: as it has required the supervision of two public authorities (AGCM and AGCOM) plus the establishment of an ad hoc Body of Surveillance (Organo di Vigilanza);

• Highly damaging: It has damaged competition and investments, consequently consumer welfare and innovation

Unbundling of activation and fault repair services can be highly cost/time effective

and create huge advantages for the competition and for end users

Introduce competition on quality of service offered to end users The impossibility of Altnets to fully control quality of services provided on provisioning and maintenance of wholesale access lines translates into:

Absence of differentiation of services to the end users

An inefficient and cumbersome process to provide wholesale

services (ie. longer provisioning times, greater costs for altnets and

poor service for end users)

Possible discriminatory behaviour by incumbents

No incentive/possibility of competition on the quality of service

offered

No competitive pressure on the incumbent to improve quality of

services

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Impossibility of Altnets to manage directly activation and fault repair services has a direct impact on the

competitiveness of the market and on end users