In a significant “u turn,” telecom commissioner Neelie Kroes seemingly has backed off a plan to increase the discounts offered to third parties who buy wholesale access from incumbent European Union service providers.
That is at least mildly surprising for a few reasons. Historically, European Commission countries have favored robust wholesale leasing policies, at least in part because, unlike the situation in North America, where two facilities-based broadband access networks exist in most markets, it was expected that only the incumbent network would be widely available.
In order to reach the EU’s Digital Agenda goal of at least half of EU residents able to access broadband at 100Mbps or more by 2020, the EC has been looking at how the regulatory environment can support and stimulate investment in next-generation networks.
In some sense, the issue is that “competition” and “investment” are, to a large extent, in some tension. It is not feasible for each competitor to build a discrete physical network, so “competition” is promoted by allowing all competitors to use one network, especially when competitors are allowed to do so at highly-discounted rates (the issue, of course, always is the proper discount amount, and the actual cost basis of the network).
But that framework makes the value of any expensive new network less attractive, especially in an uncertain market where revenue growth and opportunities for wireless declining.
Kroes said the most important conclusion from two extensive “consulations” is that operators need a stable, clear regulatory policy, so they can plan efficient investments. In other words, the EC has concluded, as had the U.S. Federal Communications Commission, that investment required one set of policies, competition another different set of policies.
The European Commission, attempting to spur investment, had thought that the only way to get incumbent telcos to invest in optical fiber access networks was to reduce further the profit from operating copper infrastructure sold to third parties.
But the EC now seems convinced that is counter productive. In part, that conclusion reflects a fundamentally-changed communications business, with growth occurring in mobile, and every existing landline product under competitive threat from substitute products.
The European Union has estimated that €270 billion will be required to build networks operating at 100 Mbps or faster.
“After examining all the evidence, and given the significant competitive relationship between copper and next-generation access, fiber networks, we are not convinced that a phased decrease in copper prices would spur NGA next generation network investment,” EU Commissioner for the Digital Agenda Neelie Kroes said.