This text aims to highlight the main aspects related to the regulatory obligations contained in the New Electronic Communications Act. References will occasionally be made to the previous Electronic Communications Act and to the European Electronic Communications Code, as provided in Articles 84 through 108.

Was there any change to the concept of significant market power?

There was no specific change to the definition of the concept of significant market power ( Article 78), and the classic definition was kept that associates this concept to the existence of a position of economic strength that allows an entity to act, to a large extent, independently of competitors, customers and consumers.

What obligations does the New Electronic Communications Act imposes on undertakings with significant market power?

The New Electronic Communications Act establishes several obligations (Article 84) for operators with significant market power ("SMPU") that is in keeping with what was already provided for in the previous Electronic Communications Act. New features include: (i) the obligation to respond to reasonable requests for access and use of infrastructure (civil engineering assets); (ii) commitments to co-invest in new elements of very high capacity networks; and (iii) obligations imposed on wholesale-only undertakings.

Is ANACOM bound to follow a hierarchy to impose regulatory remedies to SMPU?

Yes. A paradigmatic case is the access to civil engineering assets held by SMPU (Article 89). ANACOM may impose on SMPU the obligation to respond to reasonable requests for access and use of this type of infrastructure. The undertakings need not operate in the same relevant market. This results from the understanding that, regardless of the market in which they operate, the use and reuse of civil engineering assets can lead to significant savings when developing new products and innovative technical solutions, to the ultimate benefit of market competition.

The primacy in the application of this obligation does not preclude the application of the remaining obligations, whose structure and letter, with rare exceptions, remain unchanged from the previous Electronic Communications Act.

Can ANACOM impose price control and cost accounting obligations?

In the absence of effective competition (Article 92), ANACOM may impose obligations to earmark prices for costs and the obligation to adopt cost accounting systems regarding the provision of specific types of interconnection and access. However, the New Electronic Communications Act imposes more stringent conditions for the application of these obligations. ANACOM should therefore take into account the benefits arising from predictable and stable wholesale prices that ensure efficient market entry and ensure that there are sufficient incentives for undertakings to implement new and more advanced networks, including in areas of low population density, where the respective supply incentives will be lower.

What obligations can be imposed on wholesale-only undertakings?

Like the EECC, the New Electronic Communications Act considers that, in certain cases, the creation of a true wholesale market may leverage positive effects on competition in downstream retail markets and may also involve lower competitive risks.

As a rule, only non-discrimination obligations, access to, and use of specific network elements and associated facilities, or obligations concerning fair, equitable, and reasonable pricing (non-earmarking of prices for costs) can be imposed on wholesale-only undertakings (Article 101). The application of this more favorable arrangement depends on the specific undertaking's cumulative compliance with several strict requirements, which raises questions about the practical applicability of this arrangement.

Are SMPU subject to specific obligations within the context of infrastructure migration?

In a market driven by innovation, the legislator paid particular attention to the migration processes from the old copper networks to the next generation networks, considering the general consequences for competition. The New Electronic Communications Act now provides for a prior notice mechanism (Article 102) whenever such undertakings plan to decommission or replace parts of the network with new infrastructure (even if it involves pre-existing infrastructure).

Do access obligations apply only to SMPU?

No. This is an important novelty introduced by the Electronic Communications Act. Based on arguments of economic efficiency and absence of need for replication of physical resources, ANACOM may now impose access obligations on operators or owners of cabling and associated related resources inside buildings or up to the first distribution point, when this is located outside the building, whether or not they are SMPU (Article 104). The new act thus significantly strengthens the so-called symmetric regulation, applicable to all operators (as opposed to asymmetric regulation, applicable only to SMPU).

What is localized roaming and can ANACOM impose this obligation?

Localized roaming is a new feature of the New Electronic Communications Act (article 105), and is a regulatory remedy capable of overcoming "(...) insurmountable economic or physical obstacles for providing end-users with services or networks which rely on the use of radio spectrum (...)" (Recital 158 of the EECC). In certain cases, ANACOM may then impose obligations for sharing active infrastructures or the obligation to sign access agreements for localized roaming purposes.

The use of this mechanism is only warranted when there is a proven insufficiency of access and sharing of passive infrastructure. However, its imposition will depend on the cumulative fulfillment of several requirements and conditions, including the existence of insurmountable physical or economic obstacles, thus resulting in very poor or non-existent access to the network or access to services by end users (which may happen, for example, in the case of building limitations in protected areas).

What are co-investment agreements in very high capacity network elements?

The development of new, very high-capacity network elements involves large investments. Co-investment agreements provide significant benefits in terms of cost and risk sharing and can be of the following types:

(i)   Network asset co-ownership;

(ii)  Long-term risk sharing through co-financing or purchasing agreements leading to specific structural rights in favor of other undertakings providing electronic communications networks or services.

In order to benefit from a more favorable regulatory arrangement, co-investment agreements are subject to the performance of several obligations, including, their opening, during the useful life of the network built, to any undertaking providing electronic communications networks or services ( notwithstanding the possible establishment of obligations by the SMPU) and transparency criteria ( Articles 96 and 97), all of which will be assessed by ANACOM when evaluating the relevant agreement.

What is the regulatory framework of co-investment agreements?

The new Electronic Communications Act uses, in a somewhat innovative way, the protection remedies typically associated with Competition Law, namely the so-called regulation by commitments.

When evaluating the compromise proposal, ANACOM must not only comply with various criteria, but also conduct a market test and public consultation. Once the procedure is concluded, ANACOM may adopt a decision making the commitment binding in whole or in part, thereby leading to refraining from imposing heterogeneous regulatory obligations.

Note that the establishment of commitments is not a remedy exclusively related to co-investment agreements. It may also apply either in the context of cooperation agreements or in the context of agreements providing for effective and non-discriminatory third-party access to the network of vertically integrated undertakings with significant market power in one or more relevant markets.

Key Takeaways

Like the EECC, the New Electronic Communications Act maintains the typical menu of regulatory obligations, adding some novelties that arise from a greater maturity of the markets and the need to boost investment. The greatest example of this rationale is the regulatory framework applicable to very high capacity networks.

At the same time, the New Electronic Communications Act reinforces a potential imposition of symmetrical regulatory obligations, notably access, and strengthens ANACOM's power to enforce access to civil engineering assets and localized roaming.

Despite the increased powers, the imposition of regulatory obligations becomes predicated on the fulfillment of more requirements and their interconnection and interdependence is more complex.

Thus, despite the soundness of the new framework, its complexity raises legitimate doubts about its applicability in the domestic market.