Violetta Kunze
Djingov, Gouginski, Kyutchukov & Velichkov, Sofia
violetta.kunze@dgkv.com

Georgi Sulev
Djingov, Gouginski, Kyutchukov & Velichkov, Sofia
georgi.sulev@dgkv.com

Introduction

Building physical infrastructure represents a significant portion of the investments in the next generation access (NGA) networks. NGA networks are mainly optical fibre networks that allow providers to offer a very high speed of data transmission. Civil engineering works are lengthy and costly due to the need to secure the necessary permissions and the intensive utilisation of human resources. Moreover, replicating existing physical infrastructure is sometimes not technically feasible or profitable. It comes as no surprise that access to the existing physical infrastructure is subject to sectoral regulation.

Regulatory measures aimed at facilitating greater use of existing physical infrastructure can reduce the civil engineering work required to deploy new optical networks, thereby significantly lowering costs. Access to physical infrastructure is also necessary to enable the deployment of 5G networks, the Internet of Things and digital services which require high bandwidth and low latency. ‘Physical infrastructure’ in this context refers to civil engineering infrastructure capable of accommodating electronic communications networks, such as ducts, chambers, manholes and poles. Optical fibres which are not in use (dark fibre) are excluded from the scope of the physical infrastructure.

Telecom physical infrastructure used for deployment of electronic communications networks is specifically tailored to the needs of telcos and the most omnipresent network in most of the countries is controlled by the former monopoly telephone provider. Alternative physical infrastructure owned by utilities is also used by telcos where available and provides a viable alternative to the physical infrastructure specifically built for electronic communications networks.

Asymmetrical regulation of access to physical electronic communications infrastructure – a precondition for network-based competition in Bulgaria

In retrospect, asymmetrical regulation of access to physical infrastructure was always central in sectoral regulation of the electronic communications sector in Bulgaria. ‘Asymmetrical’ means that obligations are imposed only on market players with market power in contrast to ‘symmetrical’ obligations imposed on all market players irrespective of their market position.

Prior to joining the EU in 2007, Bulgaria established a specific regulatory framework for access to physical infrastructure (ducts, masts, towers, etc) controlled by the former state-owned telecom operator. Favouring network-based competition over services-based competition without any overbuilt constraints resulted in quite a significant number of alternative networks. The Communications Regulation Commission (CRC), the national regulatory authority (NRA), reported 869 active providers of electronic communications services in 2010 and the latest available numbers for 2022 are very close at 845. Most of these operators are local actors with small networks and only several operators achieved nationwide reach of their fibre networks – mostly in urban areas.

Between 2007 and 2021, access to physical infrastructure controlled by the incumbent fixed-line operator – mainly ducts and manholes in cities and major towns – was regulated under the European regulatory framework for electronic communications, with remedies imposed on the market for wholesale local access provided at a fixed location (the former wholesale market for (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location). The CRC imposed obligations to provide access, cost orientation, reference offer, non-discrimination and additional transparency obligations.

Outside cities and big towns, cable operators and internet service providers (ISPs) can build their networks overground. Most operators are using electricity poles which, until 2018, were not subject to specific regulation. Competition law played an important role whereby the Bulgarian Commission for Protection of Competition (CPC) sanctioned in three decisions in 2015 each of the three electricity distribution companies operating in Bulgaria for excessive pricing for access to electricity poles. These decisions, which were annulled in substance by the competent court, paved the way for complaints made before the CRC under the new legislation implementing the Broadband Cost Reduction Directive (BCRD).

Symmetrical regulation of access to physical infrastructure replaced asymmetrical regulation

The BCRD was transposed by the Bulgarian Electronic Communications Networks and Physical Infrastructure Law (ECNPIL) in 2018 and the CRC was designated as the dispute resolution body. Considering the tensions between the cable operators and the electricity distribution companies, the former embraced the ECNPIL as the long-awaited regulation of access to electricity poles. CRC conducted more than 80 proceedings in the first three years of application of the ECNPIL. Where the disputes involve the setting of prices by the network operator active in sectors that are different from the electronic communications, the CRC is obliged to seek a binding opinion of the respective administrative body with regulatory or supervisory powers over their activities, in most cases it was the energy regulator. The procedures were overall effective and most disputes related to the pricing of access to electricity poles were resolved. Symmetrical regulation of access to electricity poles however is limited to areas with relatively small populations where cable networks also compete with mobile and satellite services.^[1] The application of the BRCD to access to electricity poles was a testing ground for deregulation of access to physical Infrastructure for electronic communications networks which at the time was still regulated by asymmetrical obligations.

In 2019 the CRC completed its review of the wholesale access market and fully deregulated the access to physical infrastructure controlled by the incumbent fixed-line operator. The main argument of the CRC was that symmetrical regulation imposed by the BCRD is sufficient to conclude that the wholesale market for local access is effectively competitive. Under the ENCPIL, the network operator providing access is obliged to publish its terms and conditions and pricing structure, as well as to provide access under non-discriminatory conditions. According to CRC’s reasoning, the ECNPIL and the secondary legislation detailing the rules on access and pricing methodologies are sufficient to counter the eventual anticompetitive behaviour of the incumbent operator.

Since mid-2021, access to physical infrastructure for electronic communications networks in Bulgaria is regulated exclusively by the BRCD. Further to this, the CRC does not regulate any market by imposing asymmetrical regulatory obligations. This regulatory model is an exception in the EU and, at present, only in Bulgaria are telecom markets fully deregulated. As explained below, CRC plans to change that in the coming months.

Considering the wide reach of the duct network of the former incumbent telecom operator, the conditions for access to infrastructure built specifically to house communications networks are of paramount importance for all operators. In 2023, when the main fixed operator decided to increase prices for access to its duct network, the competitors immediately disputed the increase before the CRC. By two decisions in 2023, CRC resolved the disputes – its first decision abolished the increase of 25 per cent and the second decision approved an increase of 18 per cent of the prices. The increase of 18 per cent in prices was confirmed by two subsequent decisions of CRC from the end of 2023 and the beginning of 2024. Not surprisingly the decisions of CRC were appealed before the competent court and the proceedings are still pending.

Parallel to the regulatory proceedings before the telecom regulator, the symmetrical regulation under the BCRD played a role in the context of competition law proceedings. In 2021, with two decisions^[2] the competition authority allowed concentrations between the main fixed-line operator and several small competitors on the fixed internet access and pay-TV markets. According to the competition authority, the legal framework of the ECNPIL is sufficient to counter any anticompetitive behaviour related to access to physical electronic communications infrastructure. In a recent decision^[3], in February 2024, the competition authority approved the concentration between the main fixed operator and its second competitor on the pay-TV market and a close competitor on the internet access market. The CPC considered that as far as the concentration has effects on the wholesale market for physical infrastructure, the provision of access is a significant factor for the development of electronic communications services and barriers to entry into the relevant markets. However, the authority concluded that the powers of CRC to regulate under the ECNPIL are sufficient to guarantee access to physical infrastructure under fair, reasonable and non-discriminatory (FRAND) conditions. The CPC further cited the decisions from 2023 of the CRC on disputes regarding prices for wholesale access to physical infrastructure as effective regulatory tools and concluded that the barriers to entry on the market for retail internet access services are low and the merged entity cannot restrict the entry of new competitors.

According to the CPC, the procedures under the ECNPIL conducted by the CRC are not parallel to the application of competition law. Investigating a possible abuse of dominance by the main fixed-line operator in the form of an increase of the prices for duct access by 25 per cent, the CPC applied the state action doctrine and stayed the proceedings pending a final decision by the administrative court on the legality of the CRC decision under the BRCD. The CPC cited a judgement of the Bulgarian Supreme Administrative Court, which requires the staying of proceedings when the anti-competitive behaviour which is also subject to a dispute resolution decision taken by the CRC. Furthermore, the CPC stated that the assessment of the behaviour under the sectoral regulatory framework (the BRCD) is central to the assessment of anticompetitive behaviour. According to the CPC, the breach of EU and Bulgarian antitrust law, which are due to inconsistency in the legal framework, are not attributed to the undertaking due to the lack of autonomous behaviour.

Draft decision on market analysis of the wholesale market for passive (physical) infrastructure – the NRA plans to reinstate asymmetrical regulation in 2024

Against the background of the application of the BCRD, the CRC decided to act under its powers granted by the European Electronic Communications Code and on 26 February 2024 published a draft decision for market analysis of the wholesale market for passive (physical) infrastructure.^[4] The possibility of analysing the market for physical infrastructure as a standalone market under the framework for review of markets susceptible to ex ante regulation has been on the agenda of the CRC since 2010, however, it was never completed. Instead, the CRC imposed passive infrastructure remedies on the wholesale local access market (wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location). With the draft decision, the CRC plans to reinstate the same obligations that were withdrawn from the wholesale local access market in its 2019 review. The draft decision includes the full set of remedies: access, non-discrimination, transparency (key performance indicators (KPIs)), reference offer for ducts access and cost orientation of prices determined by a cost model approved by CRC back in 2011 (its first market review of the wholesale (physical) network infrastructure access market).

Considering the difficulties in the application of BCRD, the CRC explains in the draft market analysis that the symmetrical obligations are not sufficient and the wholesale market for passive (physical) infrastructure does not tend towards effective competition within the relevant time horizon. Furthermore, the CRC considers that competition law alone is insufficient to adequately address the identified market failures. In the draft decision, the CRC contradicts its own deregulatory decision from 2019 by stating that its competence under the BCRD is not sufficient despite the completion of four dispute resolution proceedings in 2023 within the time limits of BCRD.

According to the CRC, the conclusions in its draft market analysis are overall supported by the recently published Commission Recommendation on the regulatory promotion of gigabit connectivity. However, the recommendations of the European Commission are not easily aligned with the realities of fully deregulated wholesale access markets. The CRC fails to explain the necessity of reinstating the asymmetrical regulation when, pursuant to the NRA, all retail markets are effectively competitive and the reason why the BRCD is insufficient to ensure access under conditions that continue to support infrastructure-based competition.

In its draft decision, the CRC does not consider the effects of the upcoming Gigabit Infrastructure Act. The new regulation will establish a new and detailed set of principles for FRAND conditions for access, aimed specifically to counter excessive prices or unreasonable refusals of access to physical electronic communications infrastructure. The upcoming regulation will become applicable in 2026 and the CRC should have taken it into account since it is directly relevant to the market review period of five years.

What’s next?

The decision of the CRC is subject to public consultation and subsequent notification procedure under Article 32–33 of the European Electronic Communications Code, where it will be scrutinised by the European Commission, other NRAs in the EU and the Body of European Regulators for Electronic Communications. The Bulgarian NRA will have to prove that the market for passive (physical) infrastructure requires ex ante regulation even in the presence of symmetrical regulation under the national law implementing the BCRD – which the authority accepted in 2019 as sufficient to deregulate the wholesale local access market.