Telecom giants scramble over fibre networks

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This article is part of our special report Broadband: driving recovery?.

As the European Commission prepares new guidelines to deploy high-speed fibre cables across the EU, major telecom operators are recommending an approach similar to mobile telephony, based on competing networks. But such a move is rejected by new market entrants, who argue against duplicating expensive infrastructure.

The European Commission will put forward a set of guidelines for discussion in the coming months in an attempt to catch up with international competitors that are already extensively deploying Next Generation Networks (NGNs), EURACTIV has learnt. The objective is to agree on common rules by the end of the year, according to European sources close to the dossier.

NGNs were not part of the Telecoms package review proposed last November by the Commission, but are increasingly considered as a key element for development in the sector in years to come (see our LinksDossier on the Telecoms review).

Catherine Trautmann, the French socialist MEP in charge of steering the dossier through the European Parliament, has highlighted the necessity of including NGNs in the reform of the Telecoms sector on several occasions. The Parliament is widely expected to back her report in a plenary vote in July (EURACTIV 25/04/08)

For the EU's major telecom operators, "the fact that the Commission has not included this strategic element in its review of the sector is still a mystery," said Michael Bartholomew, the director of ETNO, an association which brings together former state-run companies such as Telecom Italia and France Telecom.

ETNO therefore calls on the Commission to agree new measures to spur investments and suggests adopting a system based on the model developed in the mobile phone sector. Under this model, operators tend to deploy their own networks instead of sharing infrastructure, which is the current model for landline telecom companies.

Parallel networks, though more costly, are supposed to bring prices down for customers, ETNO claims, and should also help increase coverage of areas currently deprived of infrastructure for broadband Internet connections. But new market entrants such as Tiscali or Tele2 oppose this concept, preferring sharing the incumbent's infrastructure instead.

Geographical segmentation is another key measure which could favour NGN deployment in the Telecoms sector, according to incumbent operators at ETNO.

On this front, the UK is currently leading the way in Europe. The British regulator, Ofcom, has already split the national market into a series of regional markets with different regulatory needs on the basis of their level of competition (EURACTIV 15/02/08).

Incumbents want this measure to be applied everywhere in Europe but new entrants consider it unnecessary and the outcome to be unpredictable.

Positions

The draft report presented at the end of April by MEP Catherine Trautmann on the review of the telecoms sector suggests deploying parallel networks is the most preferable solution. If this is not possible, "an open network approach favouring shared investments and, if necessary, mandating non-discriminatory access would be needed," concludes the report.

ETNO Director Michael Bartholomew commented: "The current telecom rules were defined for a sector that looked totally different. They need to be adapted to the new challenges in order to encourage highly risky investment in new high-speed broadband networks." "It is therefore essential that the next generation networks are put at the top of the review agenda," he added.

Echoing the ETNO director, Jacques Champeauxvice-president for regulatory affairs at Orange, the mobile subsidiary of France Telecom, said: "The deployment of fibre represents a unique opportunity for real infrastructure competition to unfold. Providing access to ducts is a key instrument to spur fibre investment as it addresses the real bottleneck."

Speaking after the publication of Trautmann's report, Ilsa Godlovitchregulatory affairs director at the European Competitive Telecoms Association (ECTA), commented: "We are concerned about some contradictory aspects of the proposal, which suggest that duplicating lines rather than sharing them should be the preferred approach. We find the idea that customers would want to pay more to have multiple telephone lines from different providers going into their house unrealistic and unlikely to gain the backing of financiers," she said. 

In addition, Godlovitch described the suggestion to introduce geographical segmentation as "likely to increase red tape and raise prices, in particular for rural customers".

Background

Optical fibre backbones are considered the future of telecommunications infrastructure because they allow a faster and wider transmission of data. They are at the core of the 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, in comparison with three million in the US and 11 million across the most developed Asian countries, mainly Japan and South Korea.

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

Timeline

  • 3 June: Deadline for presentation of amendments to the Trautmann report.
  • 12 June: Conclusions of the EU Telecommunications Council on the telecoms package review.
  • 26 June: European Parliament's Industry (ITRE) Committee votes on the Trautmann report.
  • 7-11 July: First-reading vote in the European Parliament.

Further Reading

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