EC's FTTX Gamble

3:15 PM -- With her policy statement on Europe's "broadband investment environment" announced Thursday, the European Commission Vice President for the Digital Agenda Neelie Kroes was never going to be able to please everyone.

And she didn't.

The consensus view is that her various decisions favor the incumbent national operators, mainly because they will not be forced by law to cut the prices they charge alternative operators to unbundle their copper access lines. That had been a very realistic prospect: Kroes's initial consideration was that cutting copper tariffs would force the national operators to invest in fiber access in an effort to boost access network revenues, an idea the incumbents attacked fiercely in October last year. (See Euronews: Kroes Plan Is Krazy, Say Telcos.)

But after months of deliberation, Kroes decided that cutting copper line tariffs would not boost next-generation access (NGA) network investments: "After examining all the evidence, and given the significant competitive relationship between copper and NGA networks, we are not convinced that a phased decrease in copper prices would spur NGA investment. Indeed, we now see fibre investment progressing relatively well in some Member States where copper prices are around or above the EU average."

Not surprisingly, the region's alternative operators are not happy at the EC's decision. The European Competitive Telecommunications Association (ECTA) captured the mood in its statement:

    Vice-President Kroes turns her back on competition. ... We deeply regret the approach that Mrs Kroes is suggesting on price methodologies. As a result of this approach incumbents will not only be allowed to regain full monopolies on future networks, they will also be allowed to continue overcharging consumers and starving competitors on existing networks. ... The proposal on pricing is a U turn on the pro-competitive approach previously taken by Mrs Kroes and risks setting Europe back to ‘last in class’ in high speed broadband by undermining competition without incentivizing more investment.

Some may think EC's decision not to force copper price cuts was inevitable, given the political and financial power that the region's major operators wield.

But Kroes, who is determined to find the best way to stimulate investments in fiber access networks, has had to make a tough call, one that could have gone either way. This time it could be said that the incumbents are the "winners."

What's important to note, though, is that this isn't always the case: The EC has not been rolling over and caving in to pressure from the incumbents in recent years. This much has been evident in the mobile market, where the EC has forced operators to reduce their voice and data roaming charges in an effort to provide consumers with better deals. Those measures stung the incumbents. (See EC Rejigs Roaming Rules and Regulators Reshape Europe's Roaming Market .)

So Kroes is no puppet. In this instance she appears to believe that penalizing the incumbents would work against the EC's fiber broadband aspirations. Now, though, she needs the incumbents to repay the faith she is showing in them, and that can be considered something of a gamble, given that the main driving forces behind incumbent strategic decisions are to maximize profits and keep investors sweet, with EC aspirations a long way down the list.

Kroes, though, will be praying she has made the right call because Europe's high-speed broadband market needs a shot in the arm from somewhere. Europe is already trailing other major industrialized regions of the world in terms of fiber access rollouts and currently is on course to achieve a FTTH household penetration rate of less than 9 percent by 2016, a less than stellar performance. (See FTTH 2012: Springtime for Euro FTTH .)

The EC's goal is to have half of all homes connected with 100 Mbit/s downstream by 2020, with the remaining homes getting at least 30 Mbit/s. Let's hope Kroes has made the right call in trying to achieve that target.

— Ray Le Maistre, International Managing Editor, Light Reading

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