Kroes unveils plans to boost fibre investment

bealtine

http://www.telecompaper.com/news/kroes-unveils-plans-to-boost-fibre-investment

Neelie Kroes, vice-president of the European Commission in charge of the Digital Agenda, has unveiled proposals to accelerate investment in next-generation fibre networks. In a speech to a conference in Brussels organised by the European Telecom Network Operators association, Kroes announced a public consultation on new regulatory models to encourage investment. She proposed two models, centred on changing wholesale access pricing on existing copper networks. Alternative providers, united in the ECTA, claim the current rates are too high, as the networks are old and largely depreciated. The high wholesale prices encourage incumbents to milk their copper networks and hold off on fibre investment. Incumbents argue that lower wholesale charges will lead to lower retail prices for broadband. This would make it difficult to recoup the cost of high and risky investment in fibre, at a time when the end-user still does not fully realise the value of higher-bandwidth services.

Kroes said that both sides have some truth, and the EC's two proposals attempt to reconcile the differences. The first would see a gradual reduction in wholesale prices for access to existing copper networks. The resulting fall in retail broadband prices would encourage incumbents to move to fibre networks, while the gradual implementation of the price cuts would give them time to weather the transition and for consumers to adapt to higher bandwidth offers. The second model could see incumbents escape at least part of the price cuts if they agree to switch to fibre within a certain period and switch off their copper networks. Wholesale price cuts would then only apply in areas where there was no fibre investment. According to Kroes, market research on this approach points to breakeven fibre networks within ten years due to the reduced costs of operating a parallel copper network.

To further encourage incumbents, the EU would reconsider wholesale pricing on next-generation networks, to take into account risks such as consumer take-up, competition from other network types and execution risks when calculating the cost of capital. The EC would also sweeten the offer with up to EUR 6.4 billion in financing assistance for new networks. For the 2014-2020 period, the commission has proposed a new "Connecting Europe Facility", of which EUR 6.4 billion would be earmarked for broadband infrastructure, largely in the form of equity, debt or credit guarantees from the EC and EIB.

The consultation, open until 28 November, also aims to harmonize bitstream pricing across the EU. Prices currently range from as little as EUR 5.21 per month in Lithuania to EUR 12.41 in Ireland, while regulators are applying the requirement for non-discrimination in different ways. Depending on the results of the consultation, the EC has threatened to issue a recommendation that would require national regulators to take a more standardised approach to calculating the cost and setting the terms of local loop access, in order to narrow the gap in pricing.

bealtine

http://www.europeanvoice.com/article/imported/leading-telecoms-firms-upset-at-network-plans-/72224.aspx

Commissioner warns: ‘Invest or face price-cuts'.

The battle over what to do with Europe's ageing copper telephone lines has stepped up a gear, with Neelie Kroes, the European commissioner for the digital agenda, angering many leading telecoms firms by suggesting that they should reduce the amount they charge other companies to use their infrastructure.

Kroes, speaking in Brussels on Monday (3 October) at a conference of the European Telecoms Network Operators (ETNO), said she was launching a public consultation on the amount that incumbent operators can charge rivals for access to the network. She has signalled that she would consider price-cuts necessary if the largest companies did not respond to her demands that they invest to upgrade their networks to fibre optics – vital for high-speed broadband.

But leading companies, including Telefónica and Telcom Italia, say that a compulsory price-cut would have the reverse effect: if they cannot charge the fees that they do now, they will not be able to afford such investment.

Franco Bernabe, the chief executive officer of Telecom Italia, told the conference that Kroes's proposals were “simply crazy”, particularly at a time when profits were falling across the industry. “We need lower taxes, less regulation, a good operating environment and more profits. Instead we are getting the opposite,” he said.

Kroes complained that operators were “hesitant” to commit significant funds to roll-out of fibre optics. However, she did acknowledge that it was “unattractive to invest in a parallel fibre infrastructure” that would directly compete with a cheaper copper network.
Speed and capacity

The Commission does appear to agree with the incumbent companies that consumers do not yet appreciate the advantages that fibre brings in terms of speed, quality and capacity. In other words, at the moment consumers would be happy simply paying less for copper. Incumbents believe that there has to be a significant incentive for fibre investment to take place. One suggestion is for digital terrestrial television to move over to fibre.

Newer telecoms companies, which do not own their own infrastructure but pay the incumbent operators (mainly former state monopolies) to use theirs, agree with Kroes's suggestion that costs are too high, given that copper is an old technology. They argue that incumbents prefer to make easy profits on the old copper network instead of investing in new fibre networks.

Kroes said that there had to be a model that would encourage incumbents to invest, so that the copper infrastructure could be switched off and replaced with fibre. “I have seen evidence that the gradual switch-off of copper could reduce the cost to such a degree that new fibre investments break even in under 10 years,” she said at the conference. But this is likely to be fiercely opposed by incumbent companies.

“It would be very dangerous if rules were twisted to obtain specific results, for example to adapt the cost methodology just in order to achieve short-term objectives,” said Luigi Gambardella, ETNO's executive board chairman.
Missing the target

Kroes is conscious that the EU is nowhere near achieving its ‘digital agenda' target for all households to have access to broadband by 2020, and at least half of them with the fast 100 Mbps rate. The Commission believes that this will be a strong driver of economic growth.

Some European politicians are worried that the slow uptake for high-speed broadband in Europe means the region is falling behind the United States and Asia.

Newer telecoms companies welcomed Kroes's announcement. They are set to benefit if the wholesale cost of the copper network is forced down.

“It is very encouraging that the European Commission recognises that there is a need to re-assess how access prices are calculated,” said Ilsa Godlovitch, a director at the European Competitive Telecoms Association (ECTA).

She claimed that incumbent operators were making “excessive profits” on the ageing copper infrastructure, which meant consumers were paying high prices and fibre investment was not taking place.

However, she said she was concerned that the wholesale charges for fibre could be allowed to increase. “History shows us that allowing excessive profit has not brought investments in networks,” she said. “Excessive prices for fibre would also undermine the digital agenda targets.”

watty

http://www.theregister.co.uk/2011/10/06/neelie_kroes_consultations_on_broadband_price_and_sharing/