Brussels to begin telecoms access price battle

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The European commissioner in charge of Telecoms, Neelie Kroes, is about to launch a public debate on revising access prices for telecoms' copper-based fixed lines in a move aimed at favouring a gradual migration to fibre-optic super-fast communications, EURACTIV has learned.

The public consultation is likely to last a couple of months and will be followed in 2012 by a recommendation on "pricing methodologies" used at national level to regulate access to the existing copper lines, Commission sources confirmed.

EU recommendations have no binding power but carry a heavy political weight and in the telecoms sector have traditionally resulted in a widespread implementation of proposed guidelines.

Operators are anxiously waiting for Brussels' guidance on access pricing, since it can have significant impact on current business models and on companies' revenues.

Top operators, like Deutsche Telekom, France Telecom, Telefonica or Telecom Italia, who inherited copper-based networks after the sector's liberalisation, are eager to maintain or even raise access prices they charge other operators to use their infrastructure.

By lowering prices, they argue, consumers will have no incentive to move to optic-fibre, thus affecting investment in what is considered the digital infrastructure of the future (see 'Background').

A hike in prices of copper-based subscriptions would instead make more attractive the transition to fibre networks. Top operators would also rely on higher margins, which will allow them to invest in new infrastructure, despite the dire economic situation.

This has indeed been the model followed so far. But results are still little visible in terms of deployment of fibre networks, which have often been carried out in Europe by new  operators entering the markets rather than by incumbents.

The case for lowering margins for copper-based networks

Alternative operators which do not own copper cables, advocate instead for more competition in the copper-based fixed lines. This would slash returns for top players, which then will have a clear reason to migrate to the fibre, they say.

An easy way to increase competition in this market is by reducing access costs to copper cables.

"We will soon start a public consultation and then we will propose a recommendation on costing methodologies, but the effects of the new criteria to be proposed will not be in favour of one or another operator," a close aide of commissioner Kroes told EURACTIV.

Despite this diplomatic answer, many are convinced that the new Commission methodology to calculate costs and prices will bring down access prices, thus spurring competition.

"The Commission could for instance propose not to include marketing costs in the methodology that determines final wholesale prices to access copper lines," argues an industry source. If incumbents were prevented to include these costs in the bill for new entrants, wholesale prices would inevitably go down, and so will retail prices, goes on the argument.

Two opinions issued by the European Commission in recent months confirm this line. Brussels opposed in fact the rise in access prices decided by the Italian and Spanish authorities in 2011.

 

Optical fibre backbones are considered the future of telecommunications infrastructure because they allow for faster and wider transmission of data. They are at the core of so-called Next Generation Access Networks (NGANs).

Fibre networks have been deployed slowly across the EU, covering so far only a marginal share of national markets. They account for a few hundreds of thousands of subscribers in the EU, less than in the US, and far less than in South Korea and Japan.

To upgrade EU networks, at least €300 billion of investment will be necessary, according to estimates by McKinsey, a consulting company.

 

  • Coming weeks: The Commission will launch the public consultation on access prices for fixed lines.
  • End of Nov.: The consultation to be concluded.
  • 2012: Commission to publish new guidance on pricing/costing methodologies to access copper networks.

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