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The Three Criteria Test (3CT)

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4. The Three Criteria Test (3CT)

4-1 3CT for Retail markets

4-1-1 M1: Retail Fixed Access and Calls

Based on the findings of the 3CT, the market for retail fixed access and calls is susceptible to ex ante regulation. The existing entry barriers, limited roll-out of infrastructure from relatively smaller SPs, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the susceptibility analysis are as follows:

CriteriaConclusionRationale
Entry barriersHigh entry barriers

Presence of strong economies of scale, scope, and density benefits incumbent telephone network.

Entry into the market through the construction of one's own infrastructure entails substantial investment and incurs large sunk costs.

Limited availability of wholesale of fixed access products that could allow the entrance to new entrants.

Market structure trendNo tendency towards competition

Continuing decline in legacy calls and limited roll-out of infrastructure from relatively smaller SPs (e.g., Salam and Go).

Implementation of 2020 remedies has prevented DSPs from engaging in anti-competitive behavior. These measures, however, need more time to fully reach their potential.

Sufficiency of ex post interventionEx post intervention not sufficientIn the absence of any ex ante regulation, a dominant operator might engage in entry deterring practices that would erect or reinforce barriers to entry that would protect its dominant position against potential, or actual, entrants.

Exhibit 4.1.1: Retail fixed access and calls: susceptibility to ex ante regulation assessment

4-1-2 M2: Retail Fixed Broadband Services

Characterized by significant entry barriers, the market for retail fixed broadband services demonstrates a susceptibility to ex ante regulation based on the 3CT analysis. Without such regulatory measures, the dynamics could disproportionately benefit the Dominant Service Provider, potentially undermining the market's competitive landscape and consumer interests. Details of the 3CT are as follows:

 

CriteriaConclusionRationale
Entry barriersHigh entry barriers

Presence of strong economies of scale, scope, and density in retail fixed broadband.

Entry into the market through building one's own infrastructure requires significant levels of investment & large sunk costs.

Entry could take place through wholesale fixed broadband access products if in place and if effective.

Market structure trendNo tendency towards competition

Full implementation of the Open Access measures could reduce market entry barriers and fostering competition, though achieving its full potential will take more time.

Considering competition based on its own infrastructure, it is unlikely that alternative SPs will increase their market shares over the next few years to reach effective competition.

Implementation of 2020 remedies has prevented DSPs from engaging in anti-competitive behavior. These measures, however, need more time to fully reach their potential.

Sufficiency of ex post interventionEx post intervention not sufficientIn the absence of any ex ante regulation, a dominant operator might engage in entry deterring practices that would erect or reinforce barriers to entry that would protect its dominant position against potential, or actual, entrants.

Exhibit 4.1.2: Retail fixed broadband: susceptibility to ex ante regulation assessment

4-1-3 M2.1: Retail FTTx Broadband Services

The retail FTTx Broadband market is known for having significant barriers to entry and no tendency towards competition, making it susceptible to ex ante regulation based on the 3CT analysis. It will take more time for Open Access measures to enable the market to reach its full potential. Without regulatory measures in place, the Dominant Service Provider has the potential to undermine the market's competitive environment and consumer interests. Details of the 3CT are as follows:

CriteriaConclusionRationale
Entry barriersHigh entry barriers

Large economies of scale, investment and sunk costs.

Entry into the market through building one's own infrastructure requires significant levels of investment & large sunk costs.

Entry could take place through wholesale fixed broadband access products, if in place and effective.

Market structure trendNo tendency towards competition

Full implementation of the Open Access measures is reducing market entry barriers and fostering competition, though achieving its full potential will take more time.

Considering competition based on its own FTTx network, it is unlikely that alternative SPs will increase their market shares over the next few years to reach effective competition.

Sufficiency of ex post interventionEx post intervention not sufficient

Dealing with dominance practices after they occur can be more costly for the affected parties than taking preventive measures in advance. Additionally, ex post regulation may take time to implement corrective actions.

 

Exhibit 4.1.3: FTTx Broadband Services: susceptibility to ex ante regulation assessment

4-1-4 M3: Retail leased lines

As indicated by the 3CT, the retail leased lines market has significant entry barriers in the B2B segment. However, there is a potential for competition in the B2G segment with the introduction of the Etimad platform for selected Service Providers, although it will require more time to fully develop. Without ex ante regulation, there is a risk of undermining the market's competitive landscape and consumer interests. Therefore, retail leased lines market is susceptible to ex ante regulation. Details of the 3CT analysis are as follows:

Criteria
ConclusionRationale
Entry barriersEntry barriers are high

In the B2B segment, significant economies of scale, scope, and density in telephone networks present high entry barriers.

Constructing one's infrastructure for market entry demands substantial investment and results in large sunk costs.

In the B2B segment, entry is possible through wholesale leased lines products if available and effective, yet challenges remain in accessing and sharing these products despite sufficient supply.

In the B2G segment, market entry is not possible due to the fact that only six SPs have been selected for the Etimad Platform, exclusively allowing them to conduct sales to the government.

Market structure trendNo tendency towards competition for B2B and B2G segments

In the B2B segment, limited competition exists due to economies of scale, with little expectation for significant shifts in market shares among alternative SPs in the near future.

The B2G segment sees a potential shift towards competition with the introduction of the Etimad platform, marking a positive development towards competitive dynamics.

Despite the Etimad platform in B2G, the market remains in early stages of development, with the future impact and effectiveness of the platform still uncertain.

Sufficiency of ex post interventionEx post intervention not sufficientIn the absence of any ex ante regulation, a dominant operator might engage in entry deterring practices that would erect or reinforce barriers. to entry that would protect its dominant position against potential, or actual, entrants.

Exhibit 4.1.4: Retail leased lines susceptibility to ex ante regulation assessment

      ​4-1-5 M4: Retail Mobile services

According to the results of the 3CT, retail mobile services market failed the Three Criteria Test, since ex post regulation in the last period has proven to be effective in the retail market, meaning that the retail mobile services is not susceptible to ex ante regulation. Details of the 3CT analysis are as follows:
CriteriaConclusionRationale
Entry barriersEntry barriers are high, although mitigated to some extent by the possibility of MVNO entry/expansion

Presence of strong economies of scale, scope, and density in mobile telephone networks.

Entry into the market through building one's own infrastructure requires significant levels of investment & large sunk costs.

A new MNO entrant would require access to spectrum and to build a network.

Market structure trendNo tendency towards competition although mitigated by the introduction of new MVNOs

Entry via wholesale MVNO is feasible with the introduction of 2 new MVNOs in the period 2021-2023, although their presence remains limited.

Indicators for market concentration, such as HHI, have remained stable during the period.

Sufficiency of ex post interventionEx post intervention considered sufficientEx post regulation in the retail mobile services has proven to be effective in the last few years.

Exhibit 4.1.5: Retail mobile services: susceptibility to ex ante regulation assessment

    4-2 3CT for Wholesale markets

4-2-1 M5: Wholesale Local Access and Physical Infrastructure

According to the 3CT, the market for wholesale local access and physical infrastructure is susceptible to ex ante regulation. The presence of entry barriers, absence of competitive trends, and inadequate ex post interventions all suggest that without regulatory oversight, the market dynamics may favor the Dominant Service Provider, which could negatively impact overall market dynamics and consumer interests. Details of the 3CT analysis are as follows:

CriteriaConclusionRationale
Entry barriersEntry barriers are high

Presence of strong economies of scale, scope and density in establishing access networks.

Strong structural barriers to entry and expansion.

Service depends on ownership of an access network.

Entry into the market through building own infrastructure requires significant levels of investment & large sunk costs.

Market structure trendNo tendency towards competition

Availability of alternative networks through fiber optic delivery is increasing, but achieving full coverage is not expected at the time of writing this report.

Implementation of the Access to Physical infrastructure and Interconnection regulations has improved competition, but it needs more time to be materialized.

Implementation of 2020 remedies has prevented DSP from engaging in anti-competitive behavior.

Sufficiency of ex post interventionEx post intervention not sufficient

In the absence of ex ante remedies, a dominant Service Provider could engage in refusal to supply or discriminatory pricing, that would have damaging consequences for access seekers.

 

Exhibit 4.2.1: Wholesale local access and physical infrastructure: susceptibility to ex ante regulation assessment

4-2-2 M6: Wholesale Fixed Broadband Access Services

According to the analysis conducted using the 3CT, the market for wholesale fixed broadband access services is susceptible to ex ante regulation. The existing entry barriers, lack of tendency towards competition, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

CriteriaConclusionRationale
Entry barriersEntry barriers are high

Presence of strong economies of scale, scope and density in establishing access networks.

Service depends on ownership of an access network.

Entry into the market through building own infrastructure requires significant levels of investment & large sunk costs.

Market structure trendNo tendency towards competition

Fiber optic delivery regulations are increasing fiber rollouts from alternative SPs, although the impact is limited at the time of the report.

Competition likely to be from self-supply of new fiber networks.

Implementation of the Open Access measures and the Physical Access and Interconnection regulations is going to increase competition.

Implementation of 2020 remedies has prevented DSPs from engaging in anti-competitive behavior. These measures, however, need more time to fully reach their potential.

Sufficiency of ex post interventionEx post intervention not sufficient

In the absence of ex ante remedies, a dominant Service Provider could engage in refusal to supply or discriminatory pricing, that would have damaging consequences for access seekers.

 

Exhibit 4.2.2: Wholesale fixed broadband access: susceptibility to ex ante regulation assessment

4-2-3 M7: Wholesale Transit Services

In accordance with the 3CT, the market for wholesale transit market is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

CriteriaConclusionRationale
Entry barriersEntry barriers are high

Presence of strong economies of scale, scope and density in establishing transit networks.

Service depends on ownership of an access network.

Entering the market by constructing one's own infrastructure demands substantial investment and incurs significant sunk costs.

Market structure trendNo tendency towards competition

Competition is likely to be from self-supply of transit services.

Fiber optic delivery regulations are increasing fiber rollouts from alternative SPs, although the impact is limited at the time of the report.

Unlikely to be new demand for wholesale transit for legacy switched calls due to the transition to all-IP technology, coupled with the increase in mobile and OTT calls.

Sufficiency of ex post interventionEx post intervention not sufficient

Refusing to supply or implementing discriminatory pricing for wholesale transit services could have immediate detrimental effects for access seekers, who rely on it as a crucial upstream input for their retail operations.

 

Exhibit 4.2.3: Wholesale transit market: susceptibility to ex ante regulation assessment

4-2-4 M8: Wholesale Fixed Call Termination Services

As per the insights from the 3CT, the market for wholesale fixed call termination services is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

​Criteria
ConclusionRationale
Entry barriersEntry barriers are high

Every fixed operator controls access to its subscribers via wholesale fixed voice call termination.

There are unavoidable technical barriers to entry

Market structure trendNo tendency towards competitionThe market is a structural monopoly
Sufficiency of ex post interventionEx post intervention not sufficient

Strong structural barriers to entry and expansion

Ex post intervention is likely to be too slow to address these concerns effectively

Exhibit 4.2.4: Wholesale Fixed Call Termination market: susceptibility to ex ante regulation assessment

      ​4-2-5 M9: Wholesale Terminating Segments of Leased Lines Services


According to the results of the 3CT, the market for wholesale terminating segments of leased lines services is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

Criteria
ConclusionRationale
Entry barriersEntry barriers are high

Presence of strong economies of scale, scope and density in establishing access networks.

Entry into the market through building own infrastructure requires significant levels of investment & large sunk costs.

Market structure trendNo tendency towards competition

Competition likely to be from self-supply of new fiber networks.

While investment in alternative networks is increasing this is still limited.

Implementation of 2020 remedies has prevented DSPs from engaging in anti-competitive behavior. These measures, however, need more time to fully reach their potential.

Sufficiency of ex post interventionEx post intervention not sufficient

As a key upstream input for competitors at the retail level, refusal to supply or discriminatory pricing could have immediate damaging consequences for access seekers.

Ex post intervention is likely to be too slow to address these concerns effectively.

Exhibit 4.2.5: Wholesale terminating segments of leased lines: susceptibility to ex ante regulation assessment

4-2-6 M10: Wholesale Trunk Segments of Leased Lines Services

As indicated by the 3CT, the market for wholesale trunk segments of leased lines services is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

CriteriaConclusionRationale
Entry barriersEntry barriers are high

Presence of strong economies of scale, scope and density in establishing access networks.

Entry into the market through building own infrastructure requires significant levels of investment & large sunk costs.

Market structure trendNo tendency towards competition

Competition likely to be from self-supply of new fiber networks.

While investment in alternative networks is increasing this is still limited.

Implementation of 2020 remedies has prevented DSPs from engaging in anti-competitive behavior. These measures, however, need more time to fully reach their potential.

Sufficiency of ex post interventionEx post intervention not sufficient

As a key upstream input for competitors at the retail level, refusal to supply or discriminatory pricing could have immediate damaging consequences for access seekers.

Ex post intervention is likely to be too slow to address these concerns effectively.

Exhibit 4.2.6: Wholesale trunk segments of Leased Lines: susceptibility to ex ante regulation assessment

4-2-7 M11: Wholesale Mobile Access and Call Origination

Based on the findings of the 3CT, the market for wholesale mobile access and call origination is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

CriteriaConclusionRationale
Entry barriersEntry barriers are highCan only be provided by existing national MNOs and there are entry barriers to becoming a licensed MNO (e.g., spectrum licenses and network build).
Market structure trendNo tendency towards competitionLimits on competition in the retail mobile market indicates issues in the wholesale market.
Sufficiency of ex post interventionEx post intervention not sufficientEx post intervention is likely to be too slow to address these concerns effectively.

Exhibit 4.2.7: Wholesale mobile access and call origination: susceptibility to ex ante regulation assessment

4-2-8 M12: Wholesale Mobile Termination

As per the insights from the 3CT, the market for wholesale mobile termination is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

​Criteria
ConclusionRationale
Entry barriersEntry barriers are high

Every mobile operator controls access to its subscribers via wholesale mobile termination.

Unavoidable technical barriers to entry.

Market structure trendNo tendency towards competitionThe market is a structural monopoly.
Sufficiency of ex post interventionEx post intervention not sufficientEx post intervention is likely to be too slow to address these concerns effectively.

Exhibit 4.2.8: Wholesale mobile termination: susceptibility to ex ante regulation assessment

4-2-9 M13: Wholesale MVNO Host Service

According to the results of the 3CT, the market for wholesale MVNO Host is susceptible to ex ante regulation. The existing entry barriers, lack of competitive trends, and the insufficiency of ex post interventions collectively indicate that without ex ante regulatory oversight, the market dynamics could favor Dominant Service Provider, to the detriment of overall market dynamics and consumer interests. Details of the analysis are as follows:

Criteria
ConclusionRationale
Entry barriersEntry barriers are highAt the moment of the analysis, MVNO Host Services are only provided by existing national MNOs and there are entry barriers to becoming a licensed MNO (e.g., spectrum licenses and network build).
Market structure trendNo tendency towards competition

MVNOs rely on agreements with MNOs, which can exert a nuanced influence on them.

Wholesale service prices are established in the agreements for a specified period and can rarely be adjusted for changes (e.g., seasonal promotions, etc.).

Sufficiency of ex post interventionEx post intervention not sufficientEx post intervention is likely to be too slow to address these concerns effectively.

Exhibit 4.2.9: Wholesale MVNO Host Services: susceptibility to ex ante regulation assessment


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