EC Broadband Investment Policy Roadmap Sparks Cheers from Incumbents, Jeers from Rivals

Public consultations last fall on regulated wholesale access to telecom networks, cost methodology and non-discrimination sparked a wider debate about the role of regulation in boosting competition and investment in a time of technological transition, Kroes said. The discussion showed that competition requires a level playing field where alternative operators don’t have to compete “with one hand tied behind their backs” and incumbents aren’t allowed to discriminate between their own retail arms and rivals’, she said. Truly equivalent access to incumbent networks by alternative players “is probably the most important guarantee of sustainable competition,” she said.

But over-regulation inhibits flexibility, which cuts down on the range and quality of services companies can offer different consumers, Kroes said. The EC intends to focus as far as possible on issues vital to competition, and possibly to lighten up on other rules, she said. It will also consider the direct and indirect effects of regulation, such as how regulating copper access prices can affect the pricing and return on other infrastructures, she said. The EC will aim for technology neutrality in enabling higher download capacity, Kroes said. She also promised to try to get “buy or build” signals right for regulated wholesale access prices, and to maintain regulatory stability and consistency until at least 2020.

The question whether a rise or fall in copper transmission prices will spur next-generation access (NGA) investment is complex, Kroes said. After reviewing the evidence, the EC isn’t convinced that a phased reduction in copper transmission prices will boost investment, she said. In fact, fiber investment is doing pretty well in some countries where copper transmission prices are at or above the EU average, she said.

Kroes will introduce regulatory guidance sometime in the fall, she said. It will include a recommendation on non-discrimination to help ensure that new players have equivalent access to incumbents’ networks, she said. This can be costly for existing networks, so regulators will have to make sure their conditions are proportionate, she said. They should establish key performance indicators in areas such as ordering, delivery, fault repair and quality of service, she said. Authorities must be able to check whether an efficient operator can compete with an incumbent’s retail product on the basis of the same wholesale access products provided, she said.

There will be a separate recommendation on cost methodology for regulated wholesale network access prices, Kroes said. The most reliable buy-or-build signals for investment in alternative infrastructure generally come from a long-term incremental costing method, she said. In addition, the appropriate “modern equivalent asset” for calculating copper access costs seems to be a fiber network, since no operator today would build copper, she said. Over time, consumers will place more value on what they can get from NGA networks, allowing copper transmission prices to adapt on the basis that “you pay for what you get,” she said. Where NGA network prices are regulated, she said, the rules should address investment risks by aiming for full cost recovery in the infrastructure even if future costs decline, she said.

These initiatives will allow the EU to set obligations where they're most useful for new entrants and least onerous for incumbents’ normal commercial activities, Kroes said. When regulators impose the right conditions, such as “equivalence of input” obligation, and where there’s a significant competitive constraint from operators with cost-oriented access to the copper network in line with EC guidance, or from other infrastructure-based rivals such as cable or LTE, Kroes proposed that national regulators need not have to apply cost orientation directly to NGA wholesale access products.

Kroes’ statement “will contribute to end a long period of uncertainty in the sector,” said European Telecommunications Network Operators’ Association Board Chairman Luigi Gambardella. ETNO agrees that lowering copper wholesale prices would lead to less investment in very fast broadband, it said. It welcomed more flexible NGA network pricing, but said any non-discrimination measures that would overburden network operators “should be carefully considered in view of their proportionality.” Cable Europe called the plan for long-term regulatory guidance a “reassuring step” for all investors in next-generation infrastructure.

Competitive telcos, however, said that while the non-discrimination measures will cure some of incumbents’ existing abuses, they're not enough to ensure competition and affordable broadband prices. The proposal on asset pricing “is catastrophic” for alternative players, said the European Competitive Telecommunications Association. Fiber technology and regulatory holidays have been around for years, but dominant players, instead of investing, keep asking for more money, it said. Incumbents have only partially upgraded their VDSL networks and are rebuilding their monopolies, it said.

The fact that there will be no price regulation on future networks means incumbents will be able to set access rates as high as they want, an ECTA spokesman told us. Even with equivalence of inputs, incumbents’ higher market share means they'll remain better placed than alternative operators, he said.

Kroes’ acceptance of excessive local loop unbundling prices means incumbents “have managed to implement a pricing policy that safeguards the high yields for their written-off copper networks,” said the VATM (German Competitive Carriers Association). It thwarts rivals’ plan to expand their high-performance broadband networks, and removes the pressure on incumbents to invest themselves, it said.