Update 18 July 2011: The  Belgian regulatory authorities have today published their cable access/resale decisions. The decisions are formally dated 1 July 2011 and will become effective on 1 August 2011. The core remedies listed in the EC notification are maintained, i.e. (i) analogue cable TV resale, of which Belgacom can also be a beneficiary; (ii) cable digital TV platform access, from which Belgacom is excluded as a beneficiary; and (iii) cable broadband Internet resale, from which Belgacom is excluded as a beneficiary. An English language press release is now available from the BIPT.

The BIPT decision (for Brussels Capital Region) can be accessed here.

The VRM decision (for Flemish Community) can be accessed here.

The CSA decision (for French Community) can be accessed here.

The Medienrat decision (for Germanophone Community) can be accessed here. 

Update 23 June 2011: The European Commission has today published the full text of its extensive comments letter on the Belgian regulatory authorities' notification. Whilst the European Commission is not proceeding to a second phase investigation on the market definition or on the SMP assessment, its comments include several invitations to the Belgian authorities to substantiate or better substantiate key aspects of the draft decision. The European Commission also calls into question whether it is opportune for Belgacom to be a potential beneficiary of the analogue cable-tv resale obligation, given Belgacom's presence with an IPTV offer in the geographic footprint of the cable companies. 

Update 29 March 2011: The Belgian regulatory authorities have published responses provided by interested parties, or a summary of responses received. These can be accessed directly by clicking on the hyperlinks included hereafter. The BIPT has published 10 non-confidential responses received (it states that it may add further responses once confidentiality issues are resolved), the VRM has published a document describing the 17 responses it received, and the CSA has published 15 responses.

The co-ordinated proposals call for these markets to be geographically defined along the coverage areas of the Cable-TV companies (which is a key structuring element of the decisions), and remedies to be imposed on ALL the Cable-TV companies, which are EACH proposed to be found holding Significant Market Power (SMP) within their respective coverage areas.

This T-REGS news item provides a walkthrough of the main points of the draft analyses, referencing the paragraph numbers used in the draft BIPT decision (we have verified that the VRM's, CSA's and Medienrat's draft decision broadly have the same substance and follow the same template, with adjustments only to reflect the specific authority in charge, and the details of the description of the market situation in the part of Belgium falling within its responsibility).

Product Market Definition

In order to arrive at their co-ordinated relevant product market definitions, the regulatory authorities examined a number of demand-side and supply-side substitution questions. The most salient of these substitution questions led to conclusions as follows:

Analogue TV and digital TV are in the same market:  The authorities found one-way substitution from analogue TV to digital TV (para 96), and highlighted other elements in favour of finding a single market for analogue and digital TV, e.g. retail prices of digital TV are aligned on analogue TV pricing (para 93), the basic groups of channels offered by the providers are very similar (para 90), etc.

Cable TV and xDSL-based IPTV are in the same market: The authorities found these to be substitutes (para 105), notably on the grounds of the similar nature of the retail offers (para 99), and similar retail prices being practiced by the cable companies (Cable TV) and by Belgacom (IPTV) for the TV offers and for the rent of decoders (para 98).

Satellite TV and DVB-T are NOT in the same market as Cable and xDSL-based IPTV: The lack of interactivity and lack of on-demand offers on satellite (para 115), the fact that French language and Dutch language must-carry channels are on different satellites (para 108), high up-front costs for end-users and local environmental restrictions on satellite dishes (para 111) and low-take-up (2.23% of all TV usage in Belgium) are invoked to find that satellite TV is not part of the relevant market. The same finding is reached for DVB-T, for which it is invoked that insufficient radio spectrum does not allow offers as diversified as on Cable-TV (para 124), and very low usage (less than 1% of all TV usage in Belgium) justify a finding of non-substitution. Mobile TV and Web-TV (over-the-top) were also considered and were also excluded.

Geographic Market Definition

The regulatory authorities put considerable effort into supporting their proposed conclusion (para 186) that the relevant geographic markets correspond to EACH Cable-TV companies' respective network footprint, which is the key structuring element of the draft market analyses. In doing so, they invoke, and cite, the European Commission's guidelines on market analysis and the assessment of significant market power under the Community regulatory framework, in particular Section 2.2.2 on geographic market definition. 

The regulatory authorities conducted chain-substitution analyses (para 158-162), the first analysis essentially revolving around whether a retail price reduction by one cable company (e.g. Telenet) by 10% would affect the pricing behaviour of another cable company (e.g. Tecteo) - (negative conclusion). A second chain-substitution analysis revolves around whether Belgacom IPTV (which has nation-wide retail pricing) affects cable company pricing - e.g. Belgacom responding to a cable company retail price reduction in one area - with nation-wide effect given Belgacom's pricing - triggering changed cable company retail pricing in another area  - (negative conclusion). In essence, the regulators indicate their belief that a cable company maintaining a higher price against a marginal loss of customers (to Belgacom IPTV) would be more profitable for the cable company than competing (against Belgacom IPTV) on price.

Other factors invoked are that the offers and prices in Brussels (which has 3 cable companies) vary considerably compared to one-another (para 168) and that A.I.E.S.H., which has not upgraded to digital TV, does not appear to experience competitive pressure to upgrade, despite the availability of Belgacom IPTV in its coverage area and despite the availability of cable digital TV offers in neighbouring areas. Added to this, the point is made that there is no demand and supply substitutability between different geographic areas (para 184).

Three-Criteria Test

Given that the retail market for the provision of analogue and digital TV signals is not contained in the European Commission's Recommendation on Relevant Markets Susceptible to Ex-Ante Regulation, the regulatory authorities set out to prove that the Three-Criteria test is fulfilled, and conclude that it is fulfilled (para 360).

Criterion 1 (high and persistent entry barriers): is deemed to be fulfilled (para 349).

Criterion 2 (tendency to effective competition behind the entry barriers): is also deemed to be fulfilled (para 355), notably on the grounds that the cable companies control 70-80% or 80-90% of the market depending on the communes studied (T-REGS Note: this data was verified in all draft decisions).

Criterion 3 (insufficiency of competition law): is also deemed to be fulfilled (para 263, 311, 359).

Significant Market Power (SMP) Assessment

The SMP assessment in the draft decisions focuses on the high retail market share of the cable companies (70-90% as described above), and relies in addition on the other indicators of SMP provided by the EU regulatory framework, many of which are deemed to be fulfilled.

A 'principal failing of competition' (para 371) is observed, with a retail market characterised by essentially 2 players (Cable-TV and Belgacom TV), with occasional challenge by the small DSL player Billi (with 0-5% market share in Brussels and in parts of the French speaking Community). The regulators also indicate that retail prices are higher than would be expected in a competitive market (para 371) and - importantly - that Belgacom TV is not exerting price pressure on cable companies (para 317 and para 353).

Therefore, each individual cable company is found to hold SMP on the relevant market corresponding to its geographic footprint.

Proposed Regulatory Remedies

The regulators put forward 3 key regulatory obligations on the cable companies, with associated supporting elements. These are as follows:

Remedy 1: Wholesale Digital TV Platform Access: cable companies (insofar as they offer Digital TV - not the case for A.I.E.S.H.) are proposed to be required to offer "the sharing of their digital TV signals, permitting the beneficiary to itself manage the conditional access system of its customers as well as its own decoders and human-machine interfaces" (T-REGS paraphrase) - (para 388). This should enable the beneficiary to "freely define its offer of TV channels, i.e. not only to offer channels offered by the SMP operator, but also to add channels that are not offered by the SMP operator - meaning that the beneficiary brings the channels to the digital TV platform of the SMP operator" (T-REGS paraphrase) - (para 389) - subject to the beneficiary having concluded the necessary intellectual property rights agreements (para 390).

In addition, the SMP operators would be subject to internal/external non-discrimination obligations (para 427), the publication of a reference offer (para 407), and costing based on retail-minus, and an obligation not to effect a margin-squeeze (para 432).

Remedy 2: Analogue TV Resale: cable companies are proposed to be required to offer analogue TV resale, on the grounds that this is a necessary accompaniment of digital TV in the relevant markets given Belgian market dynamics where analogue and digital TV are offered in parallel by cable companies and widely used by customers (para 452). An essentiality test in this respect is put forward (para 450), and existing wholesale demand for such analogue TV resale is put forward (para 453).

Again, the SMP operators would be subject to internal/external non-discrimination obligations (para 475), the publication of a reference offer, and costing based on retail-minus (with para 482 detailing how to calculate the retail-minus).

Remedy 3: High Speed Internet Resale: cable companies are proposed to be required to offer high speed Internet resale, on the grounds that it is an essential accompaniment to the analogue/digital TV obligations, to achieve the efficiency of the TV remedies (para 510). This is substantiated on the grounds that multi-play bundles are of increasing essentiality, given increased customer take-up of bundles, the emergence of TVs combining TV content and Internet access, the bundling of TV and Internet-transmitted offers by the cable companies (including Telenet's Yelo iPhone/iPad TV streaming offer over WiFi launched last week) - (paras 490, 507-509).

Again, the SMP operators would be subject to internal/external non-discrimination obligations (para 535), the publication of a reference offer, and costing based on retail-minus (with para 541 detailing how to calculate the retail-minus).

T-REGS Note 1: Paragraphs 499 and 498 of the BIPT draft are distinctly unclear. Para 499 stipulates that high speed Internet resale is only to be made available insofar as the beneficiary is including it in a bundle itself, i.e. a bundle with at least one TV offer. No specification is made on whether this is a bundle generated by the access-taker itself or requiring the access-taker to take up both a TV access/resale offer and an Internet resale offer.  Para 498 could be interpreted as suggesting than an operator which would not strictly need resale of Internet access to enable it to compete with the cable SMP operators' retail bundle, may not be entitled to receive such Internet access resale. This is reminiscent of the Netherlands' OPTA decision on analogue Cable-TV resale, which enabled cable companies to reject resale demands from KPN (the incumbent telco) on the grounds that KPN enjoyed sufficient infrastructure (xDSL and DVB-T) to self-provide TV. This OPTA decision was subsequently annulled by the CBB (appeals court) on market definition grounds. Informal indications sought by T-REGS from the BIPT suggest that the Belgian regulatory authorities do NOT intend to restrict beneficiary status (e.g. on the part of Belgacom) of any of the obligations to be imposed on cable companies.

T-REGS Note 2: Each of the 3 remedies sections discussed above provide for a timeframe for implementation, which is (paras 407, 457, 517 of BIPT draft): 6 months from decision - requirement to provide a draft reference offer, followed by public consultation; 12 months from decision - requirement for final reference offer; 3 months after final reference offer - actual implementation. The implication of this is that the most aggressive timeframe possible would imply that the 4 Belgian regulatory authorities would finalise their decisions in mid-2011, with effective implementation of the remedies adopted by each of the 4 Belgian regulatory authorities 12+3 months later, i.e. by end-2012. In case the European Commission would raise objections on market definition, SMP assessment, and based on the implementation of the 2009 amendments to the EC directives, possibly also on the selection of remedies (Article 7/7a of the revised Framework Directive due to be transposed on 11 May 2011), this case could enter the new Art 7/7a process (see diagram in link), resulting in up to 6 months extra delay, without prejudice to possible/highly likely appeals under national Belgian law.

T-REGS Note 3: Separately, but also on 21 Dec 2010, the BIPT has issued a draft analysis of Market 4 (wholesale (physical) network access) and Market 5 (wholesale broadband access), in which it proposes to carve-out Cable-TV (cable not to be identified as a substitute on these markets) and Fibre (not available and not expected to become available within the timeframe of validity of the review). The BIPT proposes to continue existing regulation, including copper unbundling from the MDF, and enhanced regulation of VDSL2-based wholesale broadband access, including a new regulated multicast capacility to facilitate the provision of IPTV by alternative operators. The obligation on sub-loop unbundling would be phased-out, and the risk-premium on VDSL2 WBA would also be removed.

The full text of the Belgian regulatory authorities' draft decisions on proposed access to Cable TV can be accessed by clicking on the links hereafter:

VRM (Flemish Community) - affecting Telenet, Tecteo and Numericable.

CSA (Francophone Community) - affecting Tecteo, Brutele, A.I.E.S.H. and Telenet.

Medienrat (Germanophone Community) - affecting Tecteo.

BIPT (delegated responsibility for Brussels Capital Region) - affecting Butele, Numericable and Telenet.