Upstream market regulation between competitive tension and technological innovation

ABSTRACTThe document examines challenges and innovations in telecommunications law, focusing on the European context. It highlights the importance of asymmetric regulation and ex ante identification of enterprises with substantial market power. The 2018 European Electronic Communications Code introduces pivotal changes, including co-investment agreements (Art. 76), aiming to foster cost and risk sharing among operators, benefiting smaller enterprises. Such agreements respond to the need for sustainable competition. Art. 72 introduces a new obligation: access to civil engineering infrastructures. This obligation can extend beyond the traditional market if necessary and proportionate to achieve competition and unhindered access objectives. The document emphasizes the regulations' efforts to balance the interests of economic operators and consumers, promoting competition and innovation in the telecommunications sector.KEYWORDS: Electronic communicationdigital single marketcompetition lawnet neutralitynew remedies Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 O. Pollicino, Codes of conduct between self-regulation and hard law: is there really a third way for digital regulation? The case of the European strategy against online disinformation in Riv. Trim. dir. pubb., no. 4/2022.2 This procedure was originally provided for in Article 15(1) of Directive No. 2002/21/EC (the so-called Framework Directive), under which the Commission is required to periodically review the list of these markets with a view to updating its Recommendation on the subject. To date, there are three Recommendations: the first, No. 2003/311/EC, identified eighteen markets as susceptible to ex ante regulation divided into two macro-areas (retail services and wholesale services); subsequently, Recommendation 2007/879/EC reduced the number of relevant markets to only seven, maintaining the typological division of the previous identification. Specifically, the retail services included the markets for access services on fixed networks (both local networks and new generation networks); the wholesale services included the markets for interconnection services on fixed networks and mobile networks: call origination, termination and local transit services; termination services on mobile networks and services for the provision of terminating segments of leased lines On 8 January 2013, the Commission concluded a new process of revision of the list, which led to the issue of Recommendation no. 2014/710/EU, the third and final one, which further decreased the number of regulated markets, while redefining some markets to take into account industry and technological developments. In doing so, it identified only four relevant markets: ‘Market 1: Wholesale provision of the call termination service on individual public telephone networks at a fixed location; Market 2: Wholesale provision of the voice call termination service on individual mobile networks; Market 3: (a) Local wholesale access at a fixed location; (b) Central wholesale access at a fixed location for consumer products; and Market 4: High-quality wholesale access at a fixed location’. As reported in the press, the European Commissioner for the Internal Market, Thierry Breton, has announced a new and wide- ranging consultation for early 2023, which should also cover the use and consumption of broadband on networks built by telecommunications companies (many of them former incumbents in their national markets) by the so-called “incumbents”. Over the top: see P. Licata, Telco-big tech broadband networks. Breton: “Consultation in 2023”, in corrierecomunicazioni.it, 12/9/2002, in https://www.corrierecomunicazioni.it/digital-economy/reti-a-banda-larga-telco-big-tech-breton-consultazione-nel-2023/; and Editor of Il Fatto Quotidiano, Cars, the European Commission starts consultations on the mobility of the future, in ilfattoquotidiano.it, 25/1/2022, in https://www.ilfattoquotidiano.it/2022/01/25/auto-la-commissione-europea-avvia-consultazioni-sulla-mobilita-del-futuro/6467716/.3 In the 2019 analysis, after listing the indicators used, the A.G.Com. identifies four geographically determined relevant markets: ‘(I) 3a – Milan; (II) 3a – Rest of Italy; (III) 3b – Milan; (IV) 3b – Rest of Italy’, A.G.Com, Decision No 348/19/CONS, 5, where (3a) indicates the markets for wholesale local access services at a fixed location and (3b) the markets for wholesale central access services at a fixed location for consumer products.4 M. Orofino, The multilevel ‘governance’ of electronic communications twenty years after the 2002 Framework, in federalismi.it, no. 4/2022, 703.5 Comparable, as argued in chapter one, to policy-making functions in the specific field of telecommunications.6 A. de Streel, Antitrust and Sector-Specific Regulation in the European Union: The Case of Electronic Communications, in R. Dewenter and J. Haucap (eds.), Access Pricing: Theory and Practice, Plymouth, 2008, 327.7 In truth, doctrine offers a distinction between guidelines and recommendations, inscribing them in two subgroups that are finistically determined, within the same taxonomy: guidelines, together with codes of conduct, interpretative communications or action programmes, would be ascribable to the so-called post law, which is characterised by being “ancillary and instrumental to hard law, performing both an information and communication function, and a didactic and educational function, promoting transparency and orienting the conduct of the subjects” so R. Bin, Soft Law, no Law, in A. Somma (ed.), Soft Law E Hard Law Nelle Società Postmoderne, Torino, 2009, and G. Morbidelli, Degli Effetti Giuridici Soft Law, In Riv. Reg. Somma (ed.), Soft law e hard law nelle società postmoderne, Torino, 2009, and G. Morbidelli, Degli effetti giuridici della soft law, in Riv. reg. merc., fasc. 2/2016, 1.; recommendations would instead belong to the para-law system or ‘alternative instruments to binding acts such as recommendations, opinions non-interpretive communications and for this reason recognised as “true” soft law, “since it would make absolutely clear the purpose it is intended to achieve: to create an alternative act to legislation”, so A. Poggi, Soft law nell'ordinamento comunitario, Atti del XX Convegno dell'Associazione italiana dei costituzionalisti, Padua, 2007, 410 and L. Senden, Soft Law in European Community Law, London, 2004, 112.8 R. BIN, Op. cit., p.9 Ibid.10 In other words, holders of telephone contracts or subscribers to digital platforms and social networks assume a differential position reciprocally and with respect to the masses, and this constitutes their boundary of identification and consequently of protection. An opposite example is that provided by big data, where the problem arises of regulating the massive collection and processing of data provided unambiguously by individuals – on the basis of agreements, contracts or simply on a voluntary basis – but which cannot, trivially, ‘return to sender’.11 This theme is also addressed by F. Pacini, Ai confini della normatività. Hard law and soft law in “difficult times”, Report to the Annual Conference of the Association “Gruppo di Pisa” Constitutional model and transformation of the system of sources in the economic and pandemic crises. Emergence and Persistence, Florence, 17 and 18 June 2022, passim.12 Which may include products and services offered in product or service markets otherwise defined by one or more national regulatory authorities taking into account national circumstances, after verification that such products and services are an alternative to those offered in one of the markets listed in the proposal.13 This is only done after consultation with stakeholders and ‘in close cooperation’ with the Commission.14 Article 66 provides that such guidelines may provide the basis for the interoperability of wholesale access products throughout the Union and may include guidelines for the harmonisation of technical specifications of wholesale access products capable of meeting such identified transnational demand.15 (a) the presence of high non-transitory barriers to entry, whether of a structural, legal or regulatory nature; (b) the existence of a market structure which does not tend towards the achievement of effective competition within the time frame under consideration, having regard to the state of infrastructure-based and other competition beyond the barriers to entry; (c) the insufficiency of competition law alone to adequately address the identified market failures”. These characteristics must all be present and verified at the time of the analysis by the national authority.16 This process is typical of the criminal theories of causality and borrowed from them; in particular, the theory of so-called scientific causality or criminal cover laws17 M. OROFINO, Op. cit., 704.18 Ibid.19 Ibid.20 G. De Minico, La sfida europea sulle telecomunicazioni: autori, regole, obiettivi, in A. Pace, R. Zaccaria and G. de Minico (eds.), Mezzi di comunicazione e riservatezza, Naples, 2008.21 Recital 13.22 The principle of technology neutrality is already enshrined in Article 6(e), Regulation (EU) No 283/2014 ‘Guidelines for trans- European networks in the area of telecommunications infrastructure’.23 Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (Access Directive).24 Including, but not limited to, buildings or access to buildings, building wiring, including cables, antennas, towers and other supporting structures, poles, pylons, conduits, inspection chambers, manholes and distribution cabinets.”25 In this sense Orofino, Op. cit., 707.26 As this constitutes one of the general objectives of the new Code in Art. 3.27 As argued by Orofino, op. cit. 708, ‘the aim is to remunerate their investments without compromising competition neither upstream nor, above all, downstream’.28 M. Cave and C. Doyle identify five stages characterising the possible explications of a functional separation towards ownership separation: (1) Creation of a wholesale division; (2) Virtual separation; (3) Functional separation; (4) Functional separation with incentives and/or separate governance arrangements;( 5) Legal separation in M. Cave and C. Doyle, Network separation and investment incentives in telecommunications, Coventry, 2007.29 BEREC, Guidance on functional separation under Articles 13a and 13b of the revised Access Directive and national experiences, BoR (10) 44, 2011, 7.30 G. De Minico, op. cit. , 20.31 Such an agreement should involve all the substantial parties to the asymmetrical relationship: the incumbent, as obliged to access, but also its competitors, beneficiaries of the functional separation on which the effectiveness of their right to equal access will depend”. G. De Minico, op. cit., 20.32 Ibid.33 F. Dalle Nogare, Vigilance and commitments on the single network. a game of two in Merc. conc. reg., fasc. 1/2021, 171.34 E. Apa, Commitments in electronic communications law and their coordination with the dispute resolution procedure between operators, in A. Zoppini (ed.), Tra regolazione e giurisdizione, Roma, 2017, p.126 and M. Libertini, La decisione di chiusura dei procedimenti per illeciti antitrust a seguito di impegni delle imprese interessate (art. 14-ter, l. 10 ottobre 1990, n. 287), in F. Cintioli and G. Olivieri (ed.), I nuovi strumenti di tutela antitrust, Milano, 2007, 12.35 M. Libertini, Op.cit., 20.36 G. Gitti, Gli accordi con le autorità indipendenti, in 20 anni di antitrust, Turin, 2010, p. 1122 ff.37 See, in particular, L. De Lucia and V. minervini, Le decisioni con impegni nella normativa nazionale a tutela della concorrenza e dei consumatori, in Conc. e merc., 2011, 537 for whom “On the one hand, there is the unilaterality of the undertaking's promise, which is the only party entitled to decide whether to submit commitments and to formulate their content and which, as will be seen, is also the only party to be bound by them. (…) The proposal, in fact, from a substantive point of view, is an act attributable only to the company, which may well decide to withdraw it (prior to the authority's decision) or maintain it unchanged, despite indications to the contrary from the administration; an administration which, as also clarified by the administrative court, may not in any way unilaterally modify its contents. On the other hand, there is the acceptance of the administration that is the addressee of the proposal insofar as it is the holder of the public interest underlying the power exercised by initiating the procedure”. The authors also deny the thesis of the transactional contract on the assumption that “the administration does not make any ‘concession’ to the private party nor does it negotiate with the latter the exercise of its functions. More simply, faced with the private party's unilateral obligation to implement a certain programme of actions, which the authority considers suitable to meet its concerns, it is obliged, rebus sic stantibus, to terminate the proceedings”, De Lucia - Minervini, Op. cit., 543.38 F. Cintioli, Concorrenza, istituzioni e servizio pubblico, Milan, 2010, 76, according to whom “the decision with commitments does not have the structure of an agreement, because it is, more simply, a unilateral measure that acknowledges and crystallises as legally effective an endoprocedural act of a party” and in a compliant sense CdS, no. 7307, section VI. 7307, sect. VI of 19/11/2009, according to which “decisions with commitments are not assimilable to agreements replacing administrative measures, in that the assessment entrusted to the authority, far from constituting an agreement between the parties, rather integrates a unilateral measure”.39 For an in-depth discussion that we do not have the opportunity to offer here, see Apa, Op. cit. pp. 127 ff; C. LEONE, Gli impegni nei procedimenti antitrust, Milano 2012, spec. pp.149 ff; G. Mazzantini and P. Bertoli, Gli impegni nel diritto italiana della concorrenza: un'analisi empirica a cinque anni dalla loro introduzione, in Riv. trim. dir. pubbl., fasc. 1/2013, 141.40 F. Dalle Nogare, op. cit., 17.41 Ibid.42 Foreign voices on the distinction of models include M. Cave and I. Vogelsang, How Access Pricing and Entry Interact, in Telecom. pol., no. 27/2003, pp. 717-727; in the same issue, T.M. Valletti, The Theory of Access Pricing and its Linkage with Investment Incentives in Tel.pol, no. 27/2003, 659–675; E. Forlani, Competition in Services and Efficiency of Manufacturing Firms: Does ‘Liberalization’ Matter?, in LICOS, no. 311/2012. In particular, on the alternation of competition models in the Italian legal system, see E. Gallo and E. Pontarollo Alternative Models of Competition in Telecommunications: the Italian Approach, in Merc. conc. reg., fasc. 3/2006, esp. 522–524.43 Orofino, Op. Cit., 703.44 An in-depth look at the regulatory trends contained in the European Electronic Communications Code, especially as regards investment policies in the telecommunications sector can be found in A. Manganelli, Co-investment, Wholesale-only and “Single Network": an analysis of new regulatory and market models in Telecommunications in Riv. regol. merc., fasc. 1/2022, 138.45 This is the case of the co-investment offer proposed by TIM on 29 January 2021, subsequently amended and supplemented by notes sent to the Authority on 25 March, 8 April 2021 and finally consolidated on 7 October 2022. In fact, on 20 October of the same year, the A.G.Com., by a majority resolution of the Board, rejected the consolidated offer as it did not comply with Article 87, paragraph 1, letter (c) of the Code (Article 76 CCEE), “because the economic conditions envisaged for joining in the year 2021 must also be applied to co-investors who sign the agreement within the period of 6 months starting from the date of publication of the offer”. Only after TIM's response and the modification of the terms of the offer, the A.G.Com. initiated the public consultation “concerning the modification of the commitment proposal submitted by TIM pursuant to Articles 76 and 79 CCEE through the introduction of a price indexation mechanism”, Resolution No. 385/22/CONS.46 The function of this exception would consist in an adhoc intervention in the co-investment agreement, since it would affect, where necessary, the latter in a subsidiary but not supplementary manner. As has been argued by authoritative doctrine, the NRA's power to impose supplementary obligations takes the form of an exception to the general institution of commitments, both at the genetic stage – because in the present case the modification of commitments would not be the result of a prior dialectic between the Authority and the operator – and at the final stage, because the supplementary obligation does not replace, but supplements the co-investment commitment, albeit in the same form. For further discussion see M. Bourreau, S. Hoernig and W. Maxwell, Implementing co- investment and network sharing in Cerre report, 2020, 41.47 The felicitous expression is Manganelli, Op.Cit. 15048 According to BEREC, competitive cooperation would equalise all co-investors and the operator with significant power with respect to the ability to market its offers and share the investment risks in proportion to the share contributed. This would also fulfil the requirements of flexibility in the value and timing of each co-investor's participation and the granting of reciprocal rights between co- investors after the co-invested infrastructure has been built. BEREC, Guidelines to foster the consistent application of the conditions and criteria for assessing co-investments in new very high-capacity network elements, Art. 76(1) and Annex IV EECC, 2020, BoR, 20. In this way, the legislator ensures that the information asymmetry is counterbalanced by a corresponding pre-contractual information obligation that is transparent, inspired by objective, non-discriminatory and predictable criteria.49 The lifetime of the network can only be understood with reference to the expected life of the commercial co investment scheme during which the network is fully operational, rather than the technical operating lifetime of any of the network components (that is likely longer than the commercial lifetime)”, so BEREC, Op. Cit. p.12.50 The doctrine has long posed the problem of the temporal effectiveness of regulation and commitments; in particular, the strategic nature of sectors such as telecommunications entails their natural exposure to the cycles and balances, not always fixed, of politics, so that a so-called long-term regulatory commitment is considered a useful tool for minimising the risk of regulatory instability and, on the contrary, for maximising the predictability of regulations. Among the various voices, K.A. Shepsle, Discretion, Institutions, and the Problem of Government Commitment, in Social Theory for a Changing Society, London, 1991; B. Levy and P. T. Spiller, The institutional foundations of regulatory commitment: a comparative analysis of telecommunications regulation, in J. law econ. organ., no. 10/1994, 201-246; M. BOURREAU -P. DOĞAN, Regulation and innovation in the telecommunications industry, in Tel. pol., no. 25/2001, 167–184.51 F. Dalle Nogare, op. cit., 162.