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Regulatory Framework

2017

Proximus Group Annual Report


Regulatory Framework

Table of contents 2 Termination Rates 3 International roaming 4 Spectrum 5 Current spectrum 5 Included in BIPT consultation 5 Future spectrum 5 Proposed expiry dates 5 Included in BIPT consultation 5 Cable & Broadband Regulation 5 Expiry dates 6 Fixed Telephony Regulation 6 Consumer 7 Universal Service 7 Net Neutrality 7 Review of the EU Telecom package

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Regulatory Framework

Proximus operates in a highly regulated sector. Therefore, in 2017 as in the previous years, Proximus remained subject to a number of regulatory measures.

Termination Rates The termination rates are the fees that fixed and mobile operators pay to other fixed and mobile operators to terminate a call on their network. On 26 May 2017, Mobile Termination Rates (MTR) have been set at 0.99 eurocent/min for the period 2017-2019

(vs 1.18 eurocent previously) by the Belgian regulator, the BIPT. They have been applied since 1 July. In Luxembourg, the new MTR have been set at 0.89 eurocent/min since 1 July 2017 until 31 December 2019.

MTR evolution in Belgium

MTR evolution in Luxembourg

(in â‚Źc including inflation)

(Peak MTR in â‚Źc including inflation)

12

12

10

Proximus Base/Telenet Orange (Mobistar)

8 6

10

Lux GSM Tango Orange

8 6

4

4

2

2

2018

2017

2016

2015

2014

2013

2012

2011

0

2010

2018

2017

2016

2015

2014

2013

2012

2011

2010

0

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Regulatory Framework

On 28 December 2017, the BIPT submitted to consultation a draft decision on the review of the Fixed Termination Rates (FTR) in which it proposes to set them at 0.103 eurocent/min. for both regional (intra access area) and national (extra access area) termination (currently at 0.709 eurocent/min. and 0.909 eurocent/min. respectively). FTR for local termination has not been proposed as Proximus closed the last local access point in 2017. The consultation ran until 16 February 2018 and BIPT announced it will publish its final decision in Q3 2018. The price control would not be applied anymore on TDM technology after the introduction of IP interconnection.

In Luxembourg, new maximum FTR were set by a Regulation of 28 November 2016 at 0.131 eurocent/min for 2017, 0.135 eurocent/min for 2018 and 0.138 eurocent/min for 2019 (from 0.14 eurocent/min previously).

FTR evolution in Belgium

Average FTR evolution in Luxembourg

(average in €c including inflation)

(in €c including inflation)

Proximus considers that the fixed operators should receive a fair retribution for calls ending on their networks and that the national interconnection should be de-regulated.

1.0

1.0

0.8

0.8

0.6

0.6

0.4

Local Regional (IAA) National (EAA)

0.2

0.2

2020

2019

2018

2017

2016

2015

2014

2013

2012

2018

2017

2016

2015

2014

0.0

2013

0.0

Average FTR

0.4

International roaming For years, international roaming has been under strong regulatory pressure of the EU institutions whose purpose was the complete abolition of the roaming surcharges, in order to establish so called “Roam-Like-At-Home” (RLAH) tariffs. During the transitory period to RLAH (from 30 April 2016 until 14 June 2017), operators could only apply a surcharge up to the applicable regulated wholesale rates.

rates in Europe, while Scarlet, Proximus’ low-cost telecom provider, completely abolished its roaming costs for all EU countries. Since 12 June 2017, Proximus implemented RLAH, allowing its customers to surf, call and text within the European Union like at home, without extra charges within the “Fair Use Policy” (FUP) aimed at preventing abusive usage of retail roaming services beyond periodic travelling in the EU.

End-April 2016, Proximus significantly lowered its roaming

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Regulatory Framework

Retail price caps (€ excl VAT) (€)

2015

As from 30/04/16

As from 15/06/17

Voice call out/min

0.19

H+ up to 0.05

H

SMS

0.06

H+ up to 0.02

H

Data/MB

0,20

H+ up to 0,05

H

Note: H = Home price

New roaming wholesale prices have also been set and foresee a step by step reduction over five years for data caps, with a decrease from EUR 7.7/GB as of 15 June 2017 to EUR 2.5/GB as of 1 January 2022.

The Commission is tasked with reviewing these rates every two years with its first report due at the end of 2019.

Wholesale price caps (€ excl VAT) (€)

2015

30/4/16

15/06/17

2018

2019

2020

2021

2022

Voice call/min

0.05

0.05

0.032

0.032

0.032

0.032*

0.032*

0.032*

SMS

0.02

0.02

0.01

0.01

0.01

0.01*

0.01*

0.01*

50

50

7.7

6

4.5

3.5*

3*

2.5*

Data/GB

* 2020 tariffs and beyond subject to Commission review Note: Data/GB: since regulated Wholesale caps are expressed in €/GB as of 2017, this format has been applied throughout the table

Spectrum Proximus currently holds spectrum in the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz bands to offer best in class customer experience. Proximus 800 MHz license was granted on 12 November 2013 and runs until 29 November 2033. During the auction, three blocks of 2 x 10 MHz were sold at the minimum price of EUR 120 million each. Proximus has decided to pay the concession fee in annual instalments. Each lot entails national coverage obligations with a minimum speed of 3 Mbps: 30% by November 2015, 70% by November 2017 and 98% by November 2019. Proximus currently holds 2 x 12.4 MHz in the 900 MHz band. Its initial rights were extended for the second time in April 2015 (valid until 15 March 2021) for a unique fee of EUR 75 million. In November 2015, Proximus acquired additional usage rights in this band and paid EUR 16 million for this spectrum (valid also until March 2021). For both fees, Proximus has decided to use the yearly instalment scheme.

Concerning the 1800 MHz band (also valid until 15 March 2021), Proximus also acquired additional spectrum in November 2015 to reach 124 channels (2 x 24.8 MHz) at no additional cost except the usage fee. The 2100 MHz license granted in 2001 and for which Proximus paid EUR 150 million is valid until 15 March 2021. At last, Proximus is also holder of usage rights in the 2600 MHz band that it acquired in July 2012 for a fee of EUR 20.22 million (one-off payment). This license runs until 20 June 2027 and has no coverage obligation. In May-June and August 2017, the BIPT launched consultations on the organization of an auction for new additional spectrum (700MHz and 3400-3800MHz) and on an auction for the renewal of existing spectrum (900MHz, 1800MHz and 2100MHz, which all expire by 15 March 2021).

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Regulatory Framework

Current spectrum Expiry dates

Included in BIPT consultation

29/11/33

800 MhZ

15/3/21

900 MhZ

15/3/21

1800 MhZ

15/3/01

2100 MhZ

30/6/27

2600 MhZ

Proximus 2x10 Proximus 2x12.4

OBEL 2x11.6

Telenet 2x10.2

Proximus 2x24.8 Proximus 2x15

1x 5.4

Proximus 2x20

Consultation concerns 80% of all available mobile spectrum

Telenet 2x10

OBEL 2x10

OBEL 2x24.8

OBEL 2x14.8

1x 5

OBEL 2x20

Telenet 2x24.8

Telenet 2x14.8

1x 5

Telenet 2x15

Unallocated 2x14.8

1x 5

Unallocated 2x15

Voyacom 1x45

Future spectrum Proposed expiry dates 700 MhZ

Included in BIPT consultation

All around 2040

1400 MhZ

2x30MHz 90MHz

3.4-3.8 GhZ

The texts submitted to consultation propose a hybrid auction procedure by which a certain amount of the existing spectrum (900, 1800, 2100 MHz) would be reserved for the three existing mobile operators. They also propose 20 year license duration. National roaming (700 MHz and 900/1800/2100 MHz) could be granted by the BIPT six months after a request has been introduced and only if the requesting operator fulfils its coverage obligations and has first reached at least 20% pop coverage. It would end after nine years (except in case of commercial agreement). Price would be set on a “retail minus” basis.

400MHz

Auction(s) is (are) still announced by the BIPT for end 2018 with the authorizations to be granted in Q1 2019. In its answer to the consultations, Proximus insisted on the importance of a timely renewal of the licenses at terms that are supportive for investments to ensure a flourishing and innovative Belgian mobile service industry. Proximus has highlighted that the yearly fees must be kept under control since they have been raising stronger than inflation over the past years. Proximus also highlighted the fact that spectrum must be released when there is a market need.

Cable & Broadband Regulation The 2011 decisions concerning the broadband market and imposing Proximus a.o. to offer VDSL access at cost based prices and an obligation to offer multicast were eventually annulled by the Brussels Appeal Court in June 2016. Fiber to the Home (FTTH) investments are today not regulated. The BIPT is currently reviewing the market analysis for broadband. This review will also address the question of fibre regulation (see below). Proximus has been offering commercial FTTH wholesale services since 2015 and has concluded several agreements. The 2011 decisions imposing the TV/cable networks an obligation to open their network to competitors for analogue TV, digital TV and broadband resale were appealed by the cable operators but they were upheld by the Brussels Appeal Court in November 2014 and May 2015. In November 2015, some of the cable operators lodged cassation procedures against the rulings of the Appeal Court. On 23 March 2017, the Cassation Court (French Chamber) rejected the request

for cassation from Coditel and AIESH. The decision on Telenet cassation request is still pending. The 2013 and 2016 decisions setting regulated wholesale prices of the cable operators were nullified by the Brussels Appeal Court in October 2017. However the Court also decided to minimize the effects of the annulment and has therefore stipulated that these effects will only enter into force on 30 April 2018. The Court expects the regulators to adopt new decisions by that time. The TV/cable and broadband markets are indeed subject to review and the process is currently ongoing. In a consultation held in Q3 2017, the regulators consider that these markets are still characterized by competition shortcomings and take as a stance that the market needs a third fixed player. Overall they propose a scheme for deepening the cable regulation and extending Proximus regulation from its copper to also its fiber network. In terms of pricing, the regulators propose to apply a “fair price” (i.e. price based on current costs, increased with a reasonable

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Regulatory Framework

profit margin) both for fibre and for cable (cable prices are currently based on “retail minus”). The drafts do not contain any specific indication on price levels yet. Proximus and the cable operators would have a right of mutual access where duplication of networks is not profitable. The consultations ran until end September and the final decisions are expected by mid-2018.

Proximus has challenged the regulators’ proposals imposing additional obligations. It considers that this regulatory approach lacks incentives to invest, especially in large scale network infrastructure like FTTH. Proximus pleads for a non-regulated, open and future proof fiber network, based on flexible bitstream access, enabling a competitive gigabit society. Proximus considers its commercial offers for FTTH instrumental in this approach.

Fixed Telephony Regulation On 27 December 2017, the BIPT submitted to consultation a draft decision proposing to deregulate the retail fixed telephony access and the wholesale call origination markets and to withdraw the obligations imposed to Proximus on these markets in 2013 and 2006 respectively. The consultation ran until 21 February and the final decision is expected in

Q3 2018. Proximus should include an addendum in its BRIO reference offer, where it would explain that it will continue to offer CS and CPS services as well as access to VAS services on a voluntary basis until 31 December 2019 on current conditions.

Consumer Consumer protection remains under regulatory scrutiny and, in July, the Parliament adopted a modification of the telecom law imposing new obligations, in particular measures in case of non-payment of invoices. Another modification that has been proposed by the Government sets the legal basis for the automatic introduction of the recent usage data of a customer in the BIPT “tariff simulator”. The modalities will be defined by a Royal Decree. The “Easy Switch” procedure launched by the BIPT on request of the Telecom Minister to facilitate the switch-over for fixed services (voice, internet, television and packs) effectively entered into force on 3 July 2017. When customers decide to switch provider, they only need to inform their new provider who then takes care of all necessary measures to ensure a smooth transition of the services. The new obligations will be reassessed by the BIPT by 1 July 2019. Through its “Atlas” project, the BIPT publishes maps showing the coverage of the mobile and fixed networks. The latest mobile maps published on 27 July 2017 show that Proximus continues to have the widest coverage for each mobile technology (2G, 3G and 4G), in terms of both surface area and population. As from 2018, the BIPT intends to distinguish different coverage levels on the maps.

The BIPT has also been publishing aggregated coverage maps of the fixed broadband networks of all operators together by download speed (1 Mbps, 30 Mbps, 60 Mbps and 100 Mbps) and by “statistical sectors” (there are +/- 20,000 such areas in Belgium). The last maps, published on 9 June 2017, confirm Belgium’s top ranking of high speed networks in European benchmarks. In 2018, the BIPT intends to adapt the download speeds in accordance with the EU prescriptions and to modify the resolution of the maps. The maps also identify the more rural areas with limited fixed and mobile high-speed coverage (so-called “white spots”), i.e. 39 municipalities which are essentially located in the south of the country. The BIPT prepares, together with the Telecom Minister, an action plan for improving the broadband coverage in these white zones. The identification of old and new mobile prepaid cards is now mandatory under Belgian law. This measure is meant to increase the possibility for the authorities to identify users in case of criminal activities. Proximus implemented different solutions in order to make it easier for its customers to identify their prepaid cards. After 7 September 2017, the deactivated cards that were not identified were removed from Proximus’ park.

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Regulatory Framework

Universal Service In 2013, the mandatory provision of payphones, directory enquiry services and paper and electronic directories was removed from the Belgian universal service scope and Proximus was released of the obligation to provide fixed

connections. The BIPT currently considers that the Belgian sector provides sufficient solutions that makes the designation of a universal service provider unjustifiable.

Net Neutrality “Net neutrality” represents the idea that equivalent types of traffic should be treated equally when providing internet access services. The EU Telecom Single Market Regulation of 25 November 2015 fixes the principle of Net neutrality into EU law and prevents any kind of discrimination in the provision of online content, applications and services. It has been applicable since 30 April 2016 and has been complemented by Guidelines adopted on 30 August 2016 by the body of European Regulators, BEREC, and aimed at providing guidance to the national regulators. The Guidelines cover issues related

to commercial practices (such as “zero-rating”, i.e. apps not counted in the data allowance), traffic management measures and specialized services. They also define how regulators should realize their supervision, enforcement and reporting duties. Both the Regulation and the Guidelines provide the overall Net neutrality framework on which regulators have to rely to exercise their control function. Proximus is convinced that a prescriptive and narrow interpretation of the rules must be avoided since it would hamper innovation in new services, new technologies and service quality that would be to the detriment of customers.

Review of the EU Telecom package On 14 September 2016, the European Commission released its proposal for a reviewed telecom framework bringing the existing Directives together in one European Electronic Communications Code (”the Code”) aiming to stimulate investments in new networks and balancing rules between telecom operators and internet companies Negotiations are currently underway between the EU Parliament and Council who must now merge their respective amendments to this draft Code into a single compromise text. Spectrum is one of the most controversial issues both between the institutions and among the Council itself. Member States

generally do not agree with the proposed additional spectrum coordination powers at EU level, including the minimum license duration of 25 years, which is supported by both the Parliament and the Commission. As the Parliament, the Council proposes to introduce some form of regulation for new network elements deployed under co-investment, compared to the Commission proposal that regulators should not generally regulate such projects. The Council opens the possibility for regulators to exempt new network elements from regulation also based on commercial access agreements.

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Regulatory Framework

To address the issue of alleged oligopolies, the Parliament proposes that regulators have the power to force operators to open up their networks to rivals where they hold a “jointly dominant position”. The Council retains the current core regulatory approach based on ‘Significant Market Power’ (SMP) but suggests to complement it with symmetric regulation of all providers of electronic communications networks in certain situations. On end-users rights, the Council and Parliament agree with the Commission proposal on a maximum harmonisation at EU-level. Member States should not be able to impose or maintain end user protection measures other than those agreed in the Code. The Parliament has introduced a specific proposal on the regulation of intra-EU calls and proposes that these calls are charged at no higher rate than national tariffs. The operators would have to justify the charging of additional fees. Such proposal was not included in the Commission’s initial text. The Council has still to develop its position. The proposals are not final yet. The end of the negotiations is expected by mid-2018. Member States would then have

18 months to transpose the text in their national laws making the new Code fully applicable by end 2020. Proximus advocates a profound review of the regulatory framework that incentivises investments in next-generation networks and innovative services, through a lighter regulatory regime promoting commercially negotiated voluntary wholesale instead of hands-on access regulation and wholesale price control. Proximus also pleads for a framework that guarantees a level playing field for all players both at network level and regarding services. In the context of its Digital Single Market Strategy, the Commission released, on 10 January 2017, a package on the review of the privacy rules in the electronic communications sector. The draft e-Privacy Regulation (ePR) has an extended scope, covering not only traditional electronic communications services but also over-the-top (OTT) communication services. The ePR will complement the new General Data Protection Regulation that will be in force as of 25 May 2018. The Commission aims for a political agreement between the European Council and the Parliament before that date. The ePR would apply six months after its adoption.

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Regulatory Framework - 2017  
Regulatory Framework - 2017