Commission draws up rules to promote broadband

Technology could boost economic growth but smaller firms are concerned about competition.

The European Commission is to set regulatory rules for the roll-out of super-high-speed broadband networks, in an effort to boost Europe’s flagging investment in the technology.

The new networks, using fibre-optic cables rather than traditional copper, would increase connection speeds tenfold for the average European home.

Networks are essential if advanced internet services – such as internet TV – are to stimulate economic growth, the Commission believes. It sees rules as a way to give companies confidence that investment in the networks will be profitable, while at the same time promoting competition in the market.

Smaller telecoms operators warn, however, that the current draft of the rules would drive up prices and discourage take-up of new services. They say that the large firms that were until recently national monopolies – the companies that are expected to be the prime movers behind any large-scale roll-out of fibre – will be able to shut competition out of the market.

Price flexibility

Erzebet Fitori, of the European Competitive Telecommunications Association (ECTA), says firms installing fibre would enjoy “too much flexibility” to vary the price that they charge rivals to share their networks.

ECTA fears that a former monopoly could use this flexibility to reach preferential deals with its own retail arm, while obliging rivals to pay higher prices for access. The draft envisages discounts for operators that make an up-front commitment to use a certain volume of network capacity or to pay for a fixed number of years. “Discounting mechanisms are inherently discriminatory in the current unbalanced market structure,” Fitori said. “[The discounts] can financially kill competitors…and therefore should be deleted or include stringent safeguards.”

ECTA also opposes provisions that encourage national regulators to vary the degree to which they regulate the market, applying a lighter touch in regions where competition functions well. Fitori said that this approach would “complicate” the work of telecoms operators and make it “virtually impossible to stick together a decent cross-border service”. However, she is relieved that the Commission has dropped a recommendation from an earlier draft that sought to encourage companies to engage in “co-investment” projects to roll out fibre – which ECTA feared would lead to cartel-like behaviour.

But former national monopolies strongly support discounts and varying degrees of regulation. The European Telecommunications Network Operators’ Association (ETNO) that represents them argues that companies making investments need these provisions so that they do not shoulder the entire risk themselves, while being obliged to share the benefits.

Michael Bartholomew, ETNO’s director, said the recommendation “could become a key instrument to unlock large-scale investments”. But, he added: “This would require a more targeted regulatory approach, more flexibility in pricing access to networks, as well as mechanisms for investors and access seekers to share the risks.”

Asian advances

The Body of European Regulators for Electronic Communications, a market-monitoring committee made up of national regulatory authorities, will adopt its opinion on the draft on 27-28 May. Member states will hold a non-binding vote on it on 17 June. The final version of the rules will be presented by the Commission in the autumn.

A report on the electronic communications market, presented by the Commission on Tuesday (25 May) found that Europe is “falling behind” other counties, notably Japan and South Korea, in rolling out fibre. It also criticises the regulatory approach as fragmented across member states.

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