September 19, 2008
The European Commission has called for fixed line operators to allow rivals easier access to their next generation fibre networks, in a bid to stimulate competition and adoption of next generation services.
On Thursday the EC launched a public consultation on the regulatory principles to be applied by EU member states to Next Generation Access (NGA) broadband networks, which are based on optical fibre.
Because fibre networks offer considerably more capacity and speed than the legacy copper infrastructure used by the majority of consumers, the technology is widely seen as a requirement for delivering high definition and interactive content and applications.
What the EC wants to do is establish a common regulatory framework for NGA to ensure a consistent treatment of EU operators. According to the Commission, this approach will also encourage investment in next generation networks.
Although a number of operators, both incumbents and alternative carriers, have begun rollouts of next generation infrastructure, Europe is still lagging behind other economies such as the US and Japan, in terms of NGA deployment.
In the UK, BT’s deployment of fibre has been a stop-start affair because of the high cost of deployment and concerns over return on that investment. The UK incumbent has been wrangling with regulator Ofcom about how best to extend the regulatory framework to accommodate future fibre deployment.
In Germany, when Deutsche Telekom began building a fibre network, it sought a regulatory holiday on the deployment, in order to help it recoup that investment – a request which generated much controversy.
The basic principle of the Commission’s proposal is that national regulatory authorities should provide access to the networks of dominant operators at the lowest possible level. This includes mandating access to ducts so that competitors can roll out their own fibre. But not access to unlit fibre, or ducts in cases where the population density is too low for a sustainable business model.
The proposal also includes provisions for bit stream access, which allow alternative operators direct access to the end user, via the incumbents own infrastructure, but only in the case where lower level remedies fail to address distortions of competition.
The draft provides a methodology for calculating a proper rate of return on investment, including a risk premium, “bearing in mind that the nominal pre-tax weighted average cost of capital for fixed and mobile operators has been roughly 8 to 12 per cent in recent years”.
According to the Commission, there are around 229 million copper lines in the EU and slightly more than 1 million fibre connections. Analysts forecast a further Eur20bn spending on NGA by 2011.
Viviane Reding, EU Telecoms Commissioner, said of the proposals, “We want to reduce the scope for divergences of regulatory approaches across Europe, in the interest of legal certainty. Uncoordinated or even contradictory action of national regulators as regards Next Generation Networks could seriously damage competition and undermine Europe’s single market. We propose in particular that project-specific risk premiums should be applied, so that competition can flourish while those who invest are rewarded in line with the risks they have incurred.”