Neelie Kroes, vice-president of the European Commission in charge of the Digital Agenda, has unveiled proposals to accelerate investment in next-generation fibre networks. In a speech to a conference in Brussels organised by the European Telecom Network Operators association, Kroes announced a public consultation on new regulatory models to encourage investment. She proposed two models, centred on changing wholesale access pricing on existing copper networks. Alternative providers, united in the ECTA, claim the current rates are too high, as the networks are old and largely depreciated. The high wholesale prices encourage incumbents to milk their copper networks and hold off on fibre investment. Incumbents argue that lower wholesale charges will lead to lower retail prices for broadband. This would make it difficult to recoup the cost of high and risky investment in fibre, at a time when the end-user still does not fully realise the value of higher-bandwidth services.
Kroes said that both sides have some truth, and the EC's two proposals attempt to reconcile the differences. The first would see a gradual reduction in wholesale prices for access to existing copper networks. The resulting fall in retail broadband prices would encourage incumbents to move to fibre networks, while the gradual implementation of the price cuts would give them time to weather the transition and for consumers to adapt to higher bandwidth offers. The second model could see incumbents escape at least part of the price cuts if they agree to switch to fibre within a certain period and switch off their copper networks. Wholesale price cuts would then only apply in areas where there was no fibre investment. According to Kroes, market research on this approach points to breakeven fibre networks within ten years due to the reduced costs of operating a parallel copper network.
To further encourage incumbents, the EU would reconsider wholesale pricing on next-generation networks, to take into account risks such as consumer take-up, competition from other network types and execution risks when calculating the cost of capital. The EC would also sweeten the offer with up to EUR 6.4 billion in financing assistance for new networks. For the 2014-2020 period, the commission has proposed a new "Connecting Europe Facility", of which EUR 6.4 billion would be earmarked for broadband infrastructure, largely in the form of equity, debt or credit guarantees from the EC and EIB.
The consultation, open until 28 November, also aims to harmonize bitstream pricing across the EU. Prices currently range from as little as EUR 5.21 per month in Lithuania to EUR 12.41 in Ireland, while regulators are applying the requirement for non-discrimination in different ways. Depending on the results of the consultation, the EC has threatened to issue a recommendation that would require national regulators to take a more standardised approach to calculating the cost and setting the terms of local loop access, in order to narrow the gap in pricing.
