Telco bosses fail to break deadlock on fibre funding

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As the European Commission takes the bull by the horns and asks companies to address a lack of investment in high-speed fibre optic networks, big and small telcommunications firms are failing to break a deadlock on how fibre should be financed. 

CEOs from a broad range of companies met at a workshop organised by the European Commission to tackle the lack of investment in fibre optic cables, the next generation of Internet access after copper networks.

A letter penned by the CEOs of Alcatel Lucent, Deutsche Telekom and Vivendi has riled companies lower down in the food chain, which argue that big telcos do not want to play ball on financing fibre for fear of losing their dominant market share.

The 11-point letter of recommendation to help the Commission reach its broadband take-up targets is the product of a workshop on Wednesday (13 July) hosted by the EU commissioner for the Digital Agenda, Neelie Kroes.

Investors have shied away from backing fibre because the business case is not yet strong enough. Fibre cables across the EU are surprisingly few and far between compared to other continents and take-up of fibre is not guaranteed as copper is still a viable choice for many customers.

EU recommendations due in autumn

"While it is understandable that commercial players try to maximise their own advantages, we also need to recognise that we have common interests. We all want Europe to catch the high-speed broadband train," Neelie Kroes, the EU commissioner for the Digital Agenda, said after the meeting.

Last year, Commission set out an ambitious target of boosting download speeds to 30 megabits per second by 2020, which it is now in danger of missing if the Telco market cannot find a common ground.

Sources indicate that little progress was made at their roundtable discussion on the contentious point of funding fibre.

Incumbents still stand accused of hogging access to their ducts and competitors argue they should stop sweating their copper networks to attract more investors – and eventually more customers to fibre.

"We need to remove the excess profits from copper lines to make fibre more of an interesting proposition," said Ilsa Godlovitch from the European Competitive Telecommunications Association (ECTA).

Investors have indicated that they would co-finance fibre if the networks were sold as utilities, much like water and electricity, which they could then rent to various operators. This idea curries little favour with incumbents who own the networks.

Incumbents argue they are not completely against co-financing as long as it is voluntary and is done in area where there is little or no competition. ECTA argues that in areas deemed competitive, new operators would be forced to duplicate fibre lines to compete with incumbents.

"The word voluntary is very important from our perspective," said Thierry Dieu, a spokesperson from the European Telecommunications Network Operators Association (ETNO), which represents incumbent operators.

There seems to be little middle ground between the two sides, a fact Kroes appears to recognise: the Dutch economist and commissioner plans to unleash two new recommendations in the autumn to address a lack of competition in the sector.

In September, the European Commission will issue a recommendation on how companies should calculate fees for access to their networks and it will also begin a consultation on non-discrimination to try and even out the gap between incumbents and their newer rivals.

Positions

"The Commission will make use of the new enforcement tools in the EU's revised telecoms legislation, both through a case-by-case assessment of national notifications and more general guidance on key regulatory concepts, such as non-discrimination and costing methodologies," Neelie Kroes, the EU commissioner for the Digital Agenda, said after the CEO roundtable. 

"It is time to recognise that in most cases, including in cities, the market can only support one fibre network alongside any cable networks that already exist. Regulatory holidays must end now, otherwise Europe will lag behind other regions in the take up of new networks. Regardless of whether the fibre is owned by one operator or several 'co-investors', the network needs to be open and the regulatory rules must be clear," ECTA Chairman Tom Ruhan said ahead of the conference. 

"ETNO welcomes the approach taken by the Vice-President for the Digital Agenda Neelie Kroes to gather all leading players of the internet value chain, from network operators and equipment manufacturers to content and applications providers, in order to look at the challenges for the sector. The industry has presented a set of concrete recommendations for an open market, better conditions for private investment and a true level playing field," said Luigi Gambardella, the chair of ETNO's executive board.

Background

Incumbent telecoms firms and non-incumbents are at an impasse on how and where they could share network access. Incumbents who service the lines are reluctant to rent access to competitors who do not pay for the servicing, while competitors argue that incumbents revenue is high enough to allow greater access to smaller players.

In September 2010 the Commission issued a recommendation on regulated access to Next Generation Access Networks. This recommendation highlights clearly what (national) regulators can do to stimulate investment in NGA networks.

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

The debate on triggering fibre investment comes at a critical time as the Commission prepares to issue guidance on wholesale pricing and other key regulatory issues which will influence the business case for high-speed broadband in Europe.

Timeline

  • Sept. 2011: Commission to issue recommendation on access pricing.
  • Sept. 2011: Commission to start consultation on non-discrimination in telecommunications sector.

Further Reading

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