The economic replicability of downstream products is one of the prerequisites for a more flexible approach to price regulation of wholesale broadband access. Economic replicability of a product is examined using the Economic Replicability Test (ERT). As part of the ERT, the national regulatory authority examines whether the margin between the SMP network operator's retail price and the price of the relevant regulated wholesale product covers the additional downstream costs and a reasonable percentage of the common costs. In order for the wholesale access seeker to be able to compete with the SMP operator, this margin must not be negative.
The draft Gigabit Connectivity Recommendation adopted by the European Commission in February 2023, which replaces the Commission Recommendation of 20 September 2010 on regulated access to next generation access networks (NGA Recommendation) and the Commission Recommendation of 11 September 2013 on uniform non-discrimination obligations and costing methodologies to promote competition and improve the environment for broadband investments (NDCM Recommendation). Against this background the question arises as to how the application of the ERT has developed in practice and what implications the new recommendation has for the application of the ERT.
In this study, an international benchmark for the application of ERT in Austria, Belgium, Ireland, Italy, Luxembourg, Norway, Slovenia and Spain was conducted. The benchmark is focused on the following ERT parameters:
- The definition and aggregation of the flagship products
- The efficiency level of the alternative network operator
- The relevant regulated wholesale services and reference prices
- The relevant downstream costs
- The test method, the relevant timeframe and the approach to profitability
- Issues related to the definition of regional markets and to regional price differentiation
