This document summarizes the regulation of the Belgian cable broadcasting market. It finds that the main cable operators have significant market power (SMP) in their respective geographic coverage areas, with market shares over 70%. Three types of access remedies are imposed on SMP operators: access to analogue TV resale, access to digital platforms, and access to broadband resale. This aims to promote infrastructure competition and allow other operators to offer bundled television and broadband services. Implementation of reference offers and determining appropriate cost-based wholesale prices, such as retail minus pricing, proved challenging but were eventually established.

1. Regulating the Belgian cable
Reinhard Laroy - BIPT
TNO DSL Seminar
The Hague, June 16th 2014

2. Market context

3. 3
Broadcast
players
p Different cable-operators:
n Telenet (Flanders and Brussels)
n Brutélé (Wallonia and Brussels) under Voo brand
n Tecteo (Wallonia) under Voo brand
n Coditel (Brussels) under Numéricable brand
Each operating in their own coverage area.
p IPTV-operators:
n Belgacom TV, operating nationwide since 2005.
n SNOW (based on commercial multicast offer), launched early 2013
n Billi (based on unbundling offer), operating in only 19 communities.
p Satellite-operators with very limited marketshare:
n Télésat (Wallonia), TV Vlaanderen (Flanders, Brussels)
n Mobistar (nationwide), quit market in 2013
p Over the top players (OTT):
n Stievie, Netflix, etc…

4. 4
Fast
conversion
towards
digital
TV
p 81% of customers receive digital TV (end 2013)
p 19% of customers watch analogue only (40% in 2011)
p However 72% of customers still receive analogue (but only 11% of digital
cable viewers still watch analogue TV, source customer survey Phonecom)

5. Key
role
of
mul:play
p TV products are often bundled with other products
p Interactive TV features require a broadband
n video on demand
n second screen apps on smart phones & tablets
5
37%$
50%$
59%$
41%$
18%$
40%$
16%$
18%$
18%$
32%$
25%$
38%$
5%$
3%$
0%$ 20%$ 40%$ 60%$ 80%$ 100%$
2013$
2012$
2011$
2010$
single$play$TV$
double$play$
triple$play$
quadruple$
play$

6. Broadband
Market
OLO’s
are
crowed
out
of
the
market
p Belgacom’s retail broadband volumes remains stable
p Cable-operators’ volume increases …
Source: BIPT
6
4,5
4,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0,0
S1 2007
S2 2007
S1 2008
S2 2008
S1 2009
S2 2009
S1 2010
S2 2010
S1 2011
S2 2011
S1 2012
S2 2012
S1 2013
S2 2013
Broadband lines (million)
OLO's Cable Belgacom (Scarlet included)

7. Broadband
Market
OLOs
are
crowed
out
of
the
market(2)
p ... while alternative operators have negative
net-additions since 2008
à Alternative operators lose customers due to lack of bundle offer
Source: BIPT
7
97#
21#
83#
18#
74#
14#
80#
10#
58#
21#
74#
30#
70#
15#
83#
14#
3#
16#
,13#
14#
,21#
,12#
,7#
,35#
110#
100#
90#
80#
70#
60#
50#
40#
30#
20#
10#
0#
,10#
,20#
,30#
,40#
,50#
S1#2010# S2#2010# S1#2011# S2#2011# S1#2012# S2#2012# S1#2013# S2#2013#
thousand#
DSL#Belgacom#
cable#
xDSL#OLO#
FWA#

8. NGA
infrastructure
roll
out
Belgium
has
one
of
the
largest
coverages
of
NGA
networks
in
EU:
-­‐
>
87%
VDSL2
end
of
2013
-­‐ 90%
Eurodocsis
3.0
Source:
Cullen,
February
2014

9. Belgium
best
in
class
for
high
speed
uptake
9
Broadband
penetra,on
(+30
Mbps)
Subscrip,on
as
%
of
pop
–
Jan
2014
BE
NL
LT
SE
LV
RO
DK
PT
IE
LU
UK
HU
BG
PL
FI
EU
DE
SK
MT
CZ
EE
AT
ES
FR
SI
EL
CY
Source:
Digital
agenda
scorecard,
European
Commission,
2014
NGA
subscrip,on
(Docsis
3.0
and
other
NGA)
as
of
total
broadband
subscrip,on
–
Jan
2014
0%
5%
10%
15%
20%
25%
IT
0%
10%
20%
30%
40%
50%
60%
70%
BE
RO
BG
LV
NL
SE
PT
LT
MT
PL
CZ
DK
EE
FI
SI
HU
IE
UK
SK
EU
LU
ES
DE
AT
FR
IT
EL
CY
HR

10. Market Analysis 2011

11. Disclaimer
p The previous market analysis of July 2011 is not
necessary the basis for a potential new market review.
p Any previous findings on product & geographical market
definitions, SMP and remedies are as such not
necessarily a basis for the new upcoming market
analysis
11

12. Digital
TV
Telephony
Tel e p h o n y
Analogue
TV
Analogue
TV
Digital
TV
Broadband
internet
Consumer
= currently available
= currently not available 12
Digital
TV

13. Belgian
market
analysis
13
Broadband
BGC SMP
Market 4
LLU
BGC SMP
Market 5
Bitstream
incl. Multicast
Broadcast
Cable SMP
on analog & digital
Resale
analog
Digital TV
transmission
Resale
broadband

14. Broadcas:ng
approach
in
Belgium
14
Retail Wholesale
Retail market of the delivery of TV signals
• Products
• Geography: corresponding to the cable
service coverage areas
Definition
SMP
Analysis
Remedies
SMP of the main cable operators
Relevant
market?
Relevant market for ex ante regulation
3 criteria test
scope of wholesale remedies
Resale of
analogue
TV
+
transmission
digital TV
+
resale of
broadband

15. Defini:on
broadcast
market
Retail market of the delivery of TV signals,
including analogue or digital signals
over fixed networks (cable/xDSL)
Does not include:
n Free TV
n Satellite TV
n DVB-T
n TV mobile
n OTT-TV
15

16. 16
Cable
and
satellite
TV
:
no
subs:tu:on
Demand side substitution
p High set-up costs
p Several legal constraints to the installation
p Low penetration and a "niche positioning”
p Limited interactivity and on-demand services due to the lack
of a return channel
à No Substitution
Supply side substitution
p Not possible for a satellite operator to provide Cable TV
services and the opposite is also true
à No Substitution

17. SMP
of
cable
operators
17
p Market shares of cable operators in their geographical
markets are superior to 70% and remains high
despite presence of Belgacom TV since 2005
4,00
3,50
3,00
2,50
2,00
1,50
1,00
0,50
0,00
2006
2007
2008
2009
Q1 2010
Subscribers (millions)
IPTV Anlogue + Digital (cable) Analogue only

18. 18
SMP
of
cable
operators
(2/3)
p Operators have raised prices or not reduced them
€ 16
€ 15
€ 14
€ 13
€ 12
€ 11
€ 10
€ 9
€ 8
€ 7
Price Basis subscription (excl. VAT)
2005 2006 2007 2008 2009 2010
AIESH Brutélé Numericable Tecteo Telenet Belgacom TV

19. 19
SMP
of
cable
operators
(3/3)
p Analogue TV (used together with digital TV)
was key factor in barriers to change
(40% households had more than one TV in Belgium)
p The economics of scope and scale and
the multi play advantages
p Refusal of access

20. 3
criteria
test
p Broadcasting market was and is not listed in the
Recommendation on relevant markets and is therefore
subject to 3 criteria test:
High non-transitory
barriers to entry
• Network and economies of scope/scale
(including analogue functionality) not easy to
duplicate for new entrants
No tendency to effective
competition
• High market shares (higher than 70%)
despite presence of challenger since 2005
• Stable or increasing prices
• Impact of bundles
Efficiency of competition
law
• Refusal of access (and other remedies) are
difficult to tackle with competition law alone
• Delays of a possible competition case are
too long and unpredictable
20

21. Remedies
imposed
p 3 types of access remedies were imposed
n Access to an analogue TV resale offer
n Access to digital platform
n Access to a resale of the Broadband offer
21

22. 22
Analogue
TV
resale
offer
p Allows alternative operator (having appropriate content
rights) to resell the SMP analogue TV offer under its own
brand
p Offer does not differ from existing offer
p Price control: retail-minus
p Only remedy available to Belgacom (it has the possibility
to offer the other services via its own network)

23. 23
Access
to
digital
plaeorm
p Allows alternative operators to inject their signals into the
encoding platform of SMP operator
p A different television offer can be formulated
p Alternative operator is responsible for acquiring content
rights as well conditional access systems
p Price control: retail-minus.

24. 24
Resale
of
Broadband
offer
p Allows alternative operator to resell SMP broadband
offer under its own brand, but only in combination with
TV
p Remedy is applied because of increasing importance of
multiple play and multiplatform and therefore only applies
in combination with access to the TV offer
p Price control: retail-minus.

25. EC
lefer
of
comments
p Lack of wholesale analysis
BIPT added hypothetical wholesale analysis (cable only) leading to
the same conclusions as the analysis of retail market.
p Necessity of analog remedy. Does it hamper evolution?
n Still 42% watched analog & Telenet added 3 new channels
n Competitive advantage for multiple tv sets
n Analog switch off remains possible (notification period)
p Aren’t market 5 broadband measures sufficient?
n Bundle TV+broadband necessary to remain competitive
n Paying twice access fee leads to anti-competitive thresholds
n Multi platform broadcast (tablet, smartphone) needs broadband
25

26. Final
Decision
26
DECISION OF THE CONFERENCE OF REGULATORS OF THE ELECTRONIC
COMMUNICATIONS SECTOR (CRC)
OF 1 July 2011
CONCERNING THE TELEVISION BROADCASTING MARKET ANALYSIS IN THE
BILINGUAL REGION BRUSSELS CAPITAL
PUBLIC VERSION

27. Impact
of
the
cable
regula:on
p Creates opportunity for cable operators to
extend their coverage area to where they don’t
have an own infrastructure
(e.g. Telenet in Brussels & South of Belgium)
p Mobistar, Base & other OLOs can use cable
network next to Belgacom’s network to offer
bundels internet+tv to customers
p Infrastructure competition at wholesale level
could create beter service & lower prices 27

28. Implementation

29. Reference
Offers
p Feb 2012 : first draft by cable operators
(6 months after Decision of July 1st 2011)
n Incomplete
n Not implementable
p Summer 2012 : CRC writes own reference offer as
model for cable operators + sents a list of remarks to
cable operators
à New draft by cable operators in Autumn 2012
29

30. Reference
Offer
Decisions
30
Dec 2012
Consultation qualitative elements
Spring 2013
Consultation retail minus tarifs
Sep 2013
Qualitative Decision
Dec 2013
Retail minus tarifs decision

31. Cos:ng
issues:
upfront
fees
Treatment of wholesale specific costs (i.e. the startup
implementation cost) à upfront fees
p Upfront costs based on the costs of an efficient operator
à Coditel (Numéricable) as reference
p Upfront costs have to be shared between SMP and OLO
p Close cooperation between operators is taken into
account (i.e. Brutélé/Tecteo)
p Consider that 1 OLO will request dual play offer
(TV + broadband)
31

32. Result:
upfront
fees
32
Upfront fees from 330.000 € (analogue TV) to 750.000 € (dual play)
Per line fees from 2,00 € (analogue TV) to 5,00 € (dual play)
Telenet
Coditel
Brutélé
+
Tecteo
Analogue
TV
Upfront
cost
€
369.951
332.263
365.195
Per
line
one-­‐time
fee
€
per
line
2,00
2,00
2,00
Analogue
TV
+
digital
TV
Upfront
cost
€
639.695
626.833
637.751
Per
line
one-­‐time
fee
€
per
ligne
4,00
4,00
4,00
Dual-­‐play
(Analogue TV + digital TV +
broadband)
Upfront
cost
€
750.000
750.000
750.000
Per
line
one-­‐time
fee
€
per
ligne
5,00
5,00
5,00
NB:
a part of these amouts has to be paid in advance if the new entrants signs
a letter of intent (respectively 200.000, 500.000, 600.000 €)
Possibility to review the upfront fees based on an ex post
verification of the reality of the costs

33. Cos:ng
Issues:
retail
minus
(1)
p The minus has to be expressed as a percentage of
reference tarifs
p The appropriate reference is the ARPU
n It eliminates VAT and content rights
n It takes discounts and promotion into account
p If no 2P retail offers exist, the ARPU of 3P offers are
used as reference
p Treatment of the avoidable costs and ARPU
à level of the minus
33

34. Cos:ng
Issues:
retail
minus
(2)
p These cost categories have to be deducted:
n Content costs (billed separately)
n Billing and bad debt
n Marketing, sales and customer service
n Modems and set-top-boxes
n Installation and repair at customer side
p The promotional value of the Barker (self-promotion)
channel is discounted in the analogue minus
34

35. Cos:ng
Issues:
retail
minus
(3)
p Cable operators have relatively high Return on Sales (RoS)
Opérateurs
2006
2007
2008
2009
2010
2011
2012
Moyenne
Brutélé
13,26%
15,85%
17,24%
13,88%
4,69%
3,24%
3,95%
10,30%%
Coditel
32,48%
29,37%
28,47%
34,80%
32,56%
40,09%
44,35%
34,59%
Telenet
S.A.
5,72%
9,95%
11,17%
8,92%
16,45%
12,77%
16,63%
11,66%
Telenet
Group
Holding
17,67%
22,03%
23,43%
24,93%
26,52%
23,70%
26,18%
23,49%
Tecteo
20,72%
9,47%
20,96%
-­‐37,66%
-­‐39,24%
-­‐24,09%
-­‐16,43%
-­‐4,77%
p No entry if the retail margin is fully retained by SMP
p 5% RoS included in the minus calculations
35

36. Results
:
minus
p Wholesale price = (retail price VATincl. - VAT – content cost)
x (1 - M %)
p Where minus M:
p Possibility to review the minus yearly
36
Coditel
Telenet
Brutélé
Analogue TV 20%
30%
30%
Analogue TV + digital TV 20%
30%
30%
Dual-play (Analogue TV +
20%
23%
23%
digital TV + broadband)

37. Launch
of
cable
offers
37
Jan 2014
Mobistar’s Letter of Intent to Telenet, Brutélé & Tecteo
July 2014
Implementation Ready 6 months after Letter of Intent
Summer 2014
Friendly User Tests
Last quarter 2014???
Retail launch Mobistar

38. Thank you for your attention
Any questions?
©
2014
-­‐
Reinhard
Laroy
–
Reinhard.Laroy@BIPT.be