Berne, 20 March 2007
The revised Telecommunications act (FMG) and implementation revisions commit telecommunications companies with a dominant market position to offer their competitors access services at prices calculated using the LRIC method. According to the Act, only the copper local loop is affected by regulation of additional services, investments in for example fibre-optic networks are excluded from the Act and therefore remain protected.
Thanks to the provisions protecting investments, Swisscom is continuing to invest significant amounts in the expansion of its nationwide network infrastructure. Every year, the company invests between around CHF 500 million and CHF 700 million in its fixed network. This includes hundreds of millions in high-performance VDSL technology alone. By the end of 2007, Swisscom hopes to be able to supply around 50 percent of Swiss homes with this high-speed infrastructure (up to 30 Mbit/s bandwidth). This is a huge figure compared with investments in other countries. VDSL will also allow high definition TV (HDTV) to be transmitted. Swisscom Fixnet Wholesale already offers commercial VDSL services to competitors and will extend this offer in the summer of 2007. The nationwide Swisscom network infrastructure forms the basis of the Swiss information society.
The revised Telecommunications Act commits dominant market suppliers to offering competitors the following services at cost-based prices:
An overview of the new regulated products
Thanks to this service, end customers can choose between being billed for the subscriber connection by Swisscom Fixnet as in the past or being billed by another telecommunications provider.
Swisscom will provide the telecommunications provider with an existing subscriber access line but will remain responsible for operation and maintenance. All approved transmission technologies may be used on the subscriber connection. The monthly price for a subscriber access line is CHF 31. The telecommunications provider can use this access line to offer its customers a host of services, extending right up to broadband Internet connections. Swisscom customers will continue to pay CHF 25.25 (incl. VAT) for their standard domestic phone-connection. This price was fixed as a policy target by the Federal Council as part of the basic supply. If a telecommunications provider wants to offer its customers voice services only, this can still be done using the cost-effective interconnection method.
Swisscom used the LRIC method prescribed by the regulator to calculate the monthly price of CHF 31. This method is based on the expenditure of an efficient operator. The price charged is based on these costs. The LRIC method is prescribed by law and the Federal Council's Ordinance on Telecommunications Services.
The LRIC method is based on the replacement costs of the domestic access network, i.e. the model assumes an efficient provider building a new network. This approach aims to maintain infrastructure-based competition within Switzerland. The method does result in Swiss prices exceeding the European average of around CHF 17.50. The main reason for the high price is the higher build costs experienced in Switzerland (wages, SIA building standards and the nature of the ground as many lines are under asphalt). The build costs make up around 80% of the costs of the access network.
The collocation service allows the telecommunications provider to operate their own systems in a Swisscom telephone exchange and to therefore use different forms of access. Swisscom provides a zoned off area, the power supply and connection to the handover distribution frame for this purpose.
Leased lines provide guaranteed point-to-point connections between two locations. Swisscom already provides leased lines in all areas. Competition on this leased line market differs greatly from one region to the next. There is intensive competition in larger cities from providers with their own infrastructure. Swisscom's offers for regulated leased lines therefore differ from one region to the next.
The basic offer covers access to Swisscom's ducts. If there is enough capacity available, Swisscom allows other providers of telecommunication services tubing capacities for feeding in their own cables.
There is intensive competition with cable network operators on the broadband market. The Appeals Commission for Competition Issues carried out an investigation which found that the Competition Commission had not been able to prove Swisscom's dominance of the Swiss broadband market. Swisscom is not therefore offering bit-stream access as a regulated product.
Swisscom Fixnet Wholesale has been providing commercial broadband services for a long time now. These are effectively bit-stream services. The extended commercial VDSL offer will also follow after the summer of 2007.
In November 2003, the Federal Council passed the reform on revision of the Telecommunications Act (FMG). The bill envisaged a technology-neutral access regime. This would allow existing copper lines, new fibre optic cables, cable TV and mobile phone networks to all be regulated equally. Following intensive debating, the parliament has limited access to the unbundling of copper lines, cable ducts and, for four years, the broadband infrastructure.
Once the revised Act was passed by the Federal Assembly on 24 March 2006, the Federal Office for Communications produced the implementation provisions for the Telecommunications Act, in particular a new Ordinance on Telecommunications Services. This was approved by the Federal Council on 9 March 2007. The Telecommunications Act and Ordinance on Telecommunications Services come into force on 1 April 2007. Since January 2005, Swisscom has been undertaking technical, operational, legal and commercial work to satisfy these obligations.
The LRIC method for calculating cost-based prices is specified in art. 54 of the revised Ordinance on Telecommunications Services. This states that prices must be based amongst other things on the long run incremental costs (LRIC) of the network components used. These costs must be in line with the expenditure and investments of an efficient operator. The aim behind this method is to allow other providers to make efficient investments. Cable network operators should be able to invest in their networks and be competitive, while other companies should be able to invest in new technologies, for example. If the price is too low, these investments are not made or any investments already made are devalued. The provider dominating the market should also be able to make a reasonable profit from the risk-incurring investments it makes. All in all LRIC aims to allow for long-term infrastructure-based competition which expressly maintains sufficient incentive for development of the network.