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Orange Belgium disputes European Commission’s cost modelling

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Orange Belgium has petitioned the European Commission following the CRC’s draft decision on wholesale cable tariffs, claiming that actual costs have been inflated.

The draft decision included what Orange Belgium has called a “major change in the methodology of cost recovery”, which it warns could lead to “significantly” over-compensating the actual costs of the cable networks.

According to Orange Belgium, “the most impactful regress” is the incorporation of costs as if the cable operators would deploy a new network.

In a statement, the firm elaborated: “Orange Belgium believes this change is not justified by the actual costs of the cable network, as those assets do not need to be renewed, as the CRC mentions in its draft decision. This change results from an explicit intention to artificially increase the wholesale tariffs beyond their fair value to the detriment of the end customers, with the objective to support FttH roll out. Should the European Commission confirm this towards the final decision, this would result in the extension of an unjustified deadweight effect to the benefit of the cable owners. This monopoly rent will be paid at the end of the day by the Belgian customers.”

In making their decision Belgian regulators considered market analysis published in 2018 and a draft wholesale cable tariff decision published in 2019, in both of which a further decrease of cable wholesale charges was proposed in order to bring tariffs to a level of “fair charges”, an amount comprised of costs plus what regulators termed a “reasonable margin”.

Orange said: “Based on a first assessment of the draft submitted to the European Commission and published [on 7 April], Orange Belgium notes that the Belgian regulators have adapted the draft proposal of mid 2019 significantly… leading to wholesale charges that are clearly above and beyond the level of ‘fair charges’.”

In response, Orange Belgium said fair competition on the Belgian internet and TV market is “at risk.”

The European Commission has until May to adopt its position before Belgian regulators publish their final decision.