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EU wants to make copper less attractive

Neelie Kroes urged for unity in the European telecoms sector in final keynote

EU Digital Agenda Commissioner Neelie Kroes has announced a public consultation looking for ways to make copper-based telecommunications networks less attractive to operators in a bid to spur investment in fiber.

Since incumbents like Deutsche Telekom, Telefonica, France Telecom and Telecom Italia inherited copper-based networks when they were privatised in the 1990s the pace of investment in new, faster, fiber networks has been too slow for the Commission. It s now looking for ways to make copper lines less attractive.

“We need next generation networks to deliver the bandwidth-hungry services and applications that will drive future growth. No-one disputes that need. But there is no agreement on how to foster the deployment of such networks. Unfortunately, we see that, for the time being, telecom companies are hesitant to commit significant funds to fiber roll-out,” said Kroes.

“I am intrigued to find models to work together as public and private service developers to see what is possible”

Kroes said that copper pricing plays a key role for fiber investment decisions and that smaller operators consider the wholesale access prices for copper networks to be too high, given that the assets are largely depreciated. Incumbents can make easy profits on legacy copper infrastructure rather than invest significant amounts in new fiber networks. Therefore, lower copper prices would compel incumbents to invest in fibre investment, she said.

However, incumbents argue that much lower copper access prices would lower broadband retail prices, making it difficult to charge higher prices for fiber products; the revenue from which would be needed to cover the associated investment costs.

Kroes’ proposed solution involves a general approach that would, in principle, gradually lower the access prices for largely depreciated copper networks. She wants to impose extra regulation on incumbent operators who own copper networks, by lowering the price at which they are forced to grant network access to smaller rivals in unbundling deals.

However, those incumbent operators could be exempt from the lower charges if they opt to invest in fiber networks to replace copper ones.

“The approach I have just described would lower copper prices in areas where incumbents’ legacy copper networks persist for some time without significant fibre investment. But at the same time, it would create an incentive for incumbents to replace old copper networks with new fibre infrastructure,” she said.

“Such a mechanism should also reassure markets that investment in fibre is safe and profitable.”

Ilsa Godlovitch, director at the European Telecoms Association (ECTA) said that, while it is encouraging that the European Commission recognises that there is a need to reassess how access prices are calculated, the move could cause fiber wholesale charges to rise further.

“History shows us that allowing excessive profit has not brought investments in networks. All that investors need is a fair return, not excessive profits,” said Godlovitch. “The risk with allowing overly generous returns is that fiber prices could be pushed out of consumers reach. Excessive prices for fiber would also undermine the digital agenda targets,” she said.

Meanwhile, UK incumbent BT said it was reassured by Commissioner Kroes’ speech as she emphasised the need for investors to get a fair rate of return, but questioned the motive behind her desire to lower copper prices, claiming that it does not need an extra encouragement to invest in fiber.

“BT is investing billions of pounds on rolling out fiber and we do not agree that artificially lowering copper prices would aid that process. We are already deploying fibre as fast as we can and so no added incentive is needed,” said a BT spokesperson.

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One comment

  1. Rickard 03/10/2011 @ 3:07 pm

    The European Commission has launched a study of European broadband speed, in association with SamKnows, and needs up to 10,000 consumers to measure their home internet performance. They are looking for volunteers across Europe, who can sign up at: http://www.samknows.eu

    Rickard, on behalf of SamKnows

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