Industry dismisses EU plans for super-fast Internet

New proposals from the European Commission to spur investment in next-generation networks, such as fibre cables, have triggered a wave of criticism from industry.

The European Commission on Friday (12 June) put forward a second version of a draft text aimed at fostering investment in high-speed Internet infrastructure across Europe.

The Commission is proposing a new model to promote investment in new networks by encouraging joint ventures between incumbent and emerging operators to build the expensive infrastructure. 

But critics said this new approach, while potentially raising investment by pooling resources, could also lead to the creation of de facto duopolies and ultimately hamper competition on the market.

Indeed, the Commission’s new proposals would free joint ventures from an obligation to guarantee competitors access to their networks at cost-related prices.

The issue of investment and access to third parties has been at the centre of the debate over next generation networks, with incumbents saying they will not put money forward if they are not guranteed a return on their investment.

The Commission put forward its first draft for public consultation at the end of 2008 (EURACTIV 19/09/08). 

But in an unusual move, it decided to issue a second draft, opening another public consultation until the end of July 2009. Under normal circumstances, a final legal text should have been brought forward after the first consultation.

As already reported, the definitive recommendation should thus not be adopted before December (EURACTIV 15/05/09).

The new proposal triggered harsh reactions from a wide range of industry players.

"Our experience tells us that when price is not regulated, incumbents can block access by imposing unbearable fees," said Innocenzo Genna, chairman of ECTA, the European Competitive Telecommunications Association, which represents new entrants to the market.

Speaking to EURACTIV, he said the change in the Commission approach, which had so far stuck with the principle of cost-related prices, follows heavy pressure by some governments, and in particular Germany, which is home to national champion Deutsche Telekom. 

"In recent months, the president of the Commission José Manuel Barroso met three times with incumbents," Genna said, saying there had been unequal treatment.

Smaller operators are not the only ones to complain. The European Telecommunications Network Operators' Association (ETNO), which represents incumbent operators, criticised the new text as well.

"The Draft Recommendation will discourage investors, whom the Commission proposes to bear onerous access and price control obligations. NGA require a more innovative and targeted regulatory approach, which encourages all players to invest and share risk, while keeping today's vibrant competition," said Michael BartholomewETNO's director, in a statement.

Incumbents would indeed prefer having no obligations on the prices they impose to operating asking access to their networks. Moreover, they see as a threat a new proposal which would allow national authorities to regulate access to infrastructure as well as the rent or the purchase of services by smaller operators. This move is aimed at triggering competition, but could hamper investment, they claim.

Cable Europe, a trade group representing leading broadband cable TV operators, welcomed the proposal, which should provide a windfall for their business by increasing the use of cables. "What the Commission is doing today with its work on next generation infrastructure is to accelerate a race to invest further in infrastructure," the group said in a statement. "As we see it, this is a race we are already in and cable is well placed to compete," said Manuel Kohnstamm, president of Cable Europe.

Optical fibre backbones are considered the future of telecommunications infrastructure, because they allow faster and wider transmission of data than current, largely copper-based networks. Fibres are at the core of so-called 'Next Generation Networks' (NGNs).

Fibre networks have been deployed slowly across the EU so far, covering a marginal share of national markets. NGNs today only account for around one million subscribers in the EU, compared with three million in the US and 11 million in the most-developed Asian countries, primarily in Japan and South Korea.

Investment in Europe is currently low. To upgrade EU networks, at least 300 billion euros of investment will be necessary, according to estimates by McKinsey, a consulting company.

  • 24 July 2009: End of consultation on new NGN draft.
  • By end of year: Commission expected to adopt final recommendation.

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