On 2 December, the European Commission opened an in-depth investigation into the Danish Business Authority (DBA)’s draft market analysis with regard to the regulation of some regional fibre networks in Denmark.
While the Commission has no objections to most of DBA’s analysis, it has serious doubts with regard to 5 (out of 17) geographic markets where local fibre networks would be regulated despite a significant degree of infrastructure competition and the presence of open networks.
Denmark is one of the European frontrunners regarding very high capacity networks coverage (94% coverage in 2020 according to DESI), due to regional fibre deployments, and to the large footprint of cable networks.
In a series of draft measures notified on 3 November 2021, the Danish regulator DBA has defined and analysed two separate wholesale markets: a low capacity infrastructure market (including copper networks) and a high capacity infrastructure market (including fibre and cable networks).
For the low capacity market, DBA defines the market as being national in scope, and identifies the former incumbent TDC as having significant market power (SMP) on this market, which is decreasing but remains significant. TDC has offered some commitments with regard to access to copper, which DBA proposes to make binding. The Commission has no objection or comment on this part of the draft measure.
With regard to the high capacity infrastructure market, DBA has concluded that the electricity supply areas are the most relevant geographic unit, as they best reflect the variations of competitive conditions in a context where fibre deployments have largely been driven by local energy utility companies. As a result, DBA has identified 21 geographic markets and found 17 of them not to be competitive. 14 different operators (including 7 wholesale only operators) were found to have SMP.
The 5 geographic markets in relation to which the Commission’s serious doubts apply represent together less than 10% of Danish households. These markets are characterized by a significant degree of overlap between fibre and cable networks, and in many cases by the presence of wholesale only operators, or of operators that have voluntarily decided to open their network to competitors. As a result, a significant proportion of households in these markets are covered by two very high capacity networks and customers are increasingly able to choose between multiple service providers that are connecting to the open networks. In light of these specific circumstances, the Commission’s assessment at this stage is that the evidence provided by DBA is insufficient to support the conclusion that the operators (EWII, AURA, Energi Ikast, MES Fibernet and Nord Energi) proposed to be designated as SMP operators on the 5 markets, are able to behave independently from competitors and consumers and that these markets should be regulated.
The Commission therefore has serious doubts as to the compatibility of the related draft measures with EU law and considers it necessary to initiate an in-depth investigation.
In addition, the Commission services propose to issue comments regarding the proposed remedies and commitments. These comments concern DBA’s approach to pricing aspects, in relation to both wholesale only operators and vertically integrated operators, in light of the relevant provisions introduced by the Code. In particular, regarding wholesale only operators, the Commission calls on DBA to further analyse the constraints that could limit the ability and incentive of energy utility companies to charge excessive prices. With regard to vertically integrated operators, the Commission considers that DBA should strengthen its assessment as to why a price control is always necessary and proportionate for the concerned operators.
The Commission has two months to discuss the draft measures related to the five geographic markets with DBA, in close cooperation with the Body of European regulators (BEREC). At the end of the Phase II investigation period, the Commission may either lift its reservations or issue a veto under Article 32 of the European Electronic Communications Code. During this period, DBA will not be able to adopt these measures.
The Commission’s serious doubts letter opening the in-depth investigation is available online on CIRCABC.
The invitation to third parties to submit their observations is published on CIRCABC.
On 10 December 2021 DBA withdrew its notifications concerning four SMP designation in the abovementioned geographic markets, namely the markets: Brande, Ikast, Vendsyssel, and Trekantområdet. The notice of partial withdrawal can be found on CIRCABC.