The Commission yesterday (18 September) put forward a set of proposals aimed at accelerating the transition towards a new generation of high-speed, high-definition Internet services streamed through optical fibre networks. But its plans to stimulate competition in the sector immediately came under fire.
Following strong pressure from the industry (EURACTIV 04/07/08) coupled recently with calls from the European Parliament (EURACTIV 25/04/08), the Commission yesterday (18 September) finally unveiled proposals to spur investment in Next Generation Access Networks (NGANs) over the next few years.
It is expected that roughly €20 billion will be invested to replace copper lines over the next three years.
But Brussels fears the new infrastructure will be dominated by a limited number of big players and, to boost competition in the sector, it wants to allow small operators to have access to the networks owned by dominant actors. In return, competitors interested in using the networks would pay a premium to investors, thereby rewarding them for the risks they take.
Information Society Commissioner Viviane Reding had originally announced in June that this risk premium would be set at 15% (EURACTIV 26/06/08). But following criticism from the main telecoms operators, the figure was left out of the Commission’s proposal. Instead, the document says that rates of return should be calculated on the basis of the average cost of capital for telecom operators, between 8% and 12% in recent years. But an official from the Comission’s competition service indicated that “the premium should be higher than 12%”.
On top of the risk premium, the Commission is proposing a pricing methodology for calculating the fees that will have to be paid for the new services. But this suggestion has angered a range of critics. The European Regulators Group (ERG), which brings together national telecom authorities, immediately labelled the pricing proposal “overly prescriptive”, stating that it “risks hurting the sector”. The main operators opposed the suggestion as well, while new entrants welcomed it but asked for the premium to be kept as low as possible.
Brussels is also pushing for more infrastructure competition in a direct plea to small companies to deploy their own networks. But smaller actors insist that direct access to incumbents’ fibre networks is essential and infrastructure competition would simply drive many of them out of the market. According to a study published this week by ECTA (the European Competitive Telecommunications Association), which groups smaller operators, NGANs represent big business for incumbent operators, which “currently control 80-90% of all fixed telecom access lines”. In such conditions, guaranteeing access to smaller operators is a must, it argues.
Incumbent operators, on the other hand, are angered by the Commission’s plans to force them to share their new networks with their rivals. According to the main industry lobby ETNO (the European Telecommunications Networks Operators Association), multiple access obligations will act as a hurdle to the financial and technical stability of the networks. The organisation yesterday warned that investment in the telecoms sector already slowed significantly in 2007, falling from 2.3% in 2006 to 1.7%, according to figures provided by Idate. ETNO Director Michael Bartholomew blames this drop on “regulatory pressure” from Brussels.
The Commission proposals have been put to public consultation. The process will last until mid-November. The EU executive has promised to adopt a formal recommendation in 2009.