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Calling Europe's Broadband Bluff

Iain Morris

European competition commissioner Margrethe Vestager and two senior broadband regulators walk into a Brussels bar and decide -- after imbibing copious amounts of Trappist ale -- they will try to call the telcos' bluff. Fed up with being cast as pen-pushing, leftwing spoilsports, they draft a statement promising fun-sounding "regulatory holidays" and other perks if incumbents agree to pump billions of euros into new fiber networks. After bewildered operators have acquiesced, and the regulators have sobered up, Vestager disappointingly reveals it was all a drunken hoax.

Yes, it's fantastical on all sorts of levels. For example, Light Reading suspects that, as a proud Dane, Vestager is normally to be found chugging Tuborg lager, not Trappist ale...

But would the regulators be right? Is the most unrealistic part of this story that telcos would go into a fiber frenzy if only they could shake off those parasitical rivals camped on their networks?

It would certainly be interesting to find out. And perhaps we will: According to a recent report from Reuters, European officials are planning to "relax" rules on open access by getting national regulators to see if existing commercial deals -- presumably conceived in today's regulated markets -- obviate the need for rulemaking.

But is the long-standing broadband stand-off just about regulation? While operators insist that onerous wholesale and network-access obligations are the big obstacle to broadband investment, regulation doesn't entirely explain the fiber aversion. Building a nationwide fiber-to-the-home (FTTH) network in Germany, for example, would cost an eye-watering €60-80 billion (US$67-$90 billion), according to experts. Priced competitively, FTTH services should attract plenty of interest. But even if Telekom Deutschland GmbH 's broadband business were twice as big, the incumbent would have made only about €8 billion ($9 billion) in broadband revenues last year. (See Can DT, Regulators Find Common FTTH Ground?)

The rollout of gigabit broadband access networks is spreading. Find out what's happening where in our dedicated Gigabit Cities content channel here on Light Reading.

In all likelihood, our pranksome policymakers would prompt a sheepish reaction, with operators mumbling excuses about "funding" and "return on investment" before making themselves scarce.

Responsible officials don't engage in such high jinks, of course, but it would be useful to know whether rules on network access are the main broadband showstopper, and the sheer extent of other concerns. Surveys don't work in this instance, because a) regulators are a convenient scapegoat; and b) operators don't want to publicize some of their deeper fears (such as, there may never be any real money in this broadband connectivity game).

Authorities and service providers are naturally in constant discussions, but these seem likelier to resemble a game of poker than a frank confessional. And while greater insight wouldn't provide any kind of instant solution, it could help to inform regulatory moves and thoughts about public-sector funding. With no clear idea how to proceed, authorities are picking at the problem like an unhappy child at his brussels sprouts, instead of being able to skewer it head on.

The latest proposals, as outlined in the Reuters report, don't sound like they would, if they became legal reforms, clarify matters. They sound about as circuitous as regulatory moves get, and probably wouldn't make a jot of difference to FTTH investment.

Vestager might as well head for the bar.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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User Rank: Blogger
9/8/2016 | 3:14:48 PM
Editor's tip on brussels sprouts
Don't boil them for hours like your grandmother does. It stinks the kitchen out and makes them taste like used footwear. Light Reading's preferred recipe is one that involves parboliing, sauteeing and a little bacon.
User Rank: Light Sabre
9/8/2016 | 8:16:41 AM
Blind deregulation under the belief it magically results in a spike in investment just isn't supported by history. If anything, deregulating ISPs that already enjoy regulatory capture even further just entrences their monopoly power raises prices, limits competition, and results in reduced incentive to invest. I thought we had settled this just by looking at the U.S. and Canada and how consumers pay some of the highest prices in the developed world?
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