UPD2 EU Sets Out Rules to Boost Fibre Broadband Competition Until 2020

The European Commission (EC) has today set out new rules to help boost investment, development and competition in the rollout of superfast broadband technologies and services right across Europe, which will “apply at least until 2020” and support its wider Digital Agenda targets.

Europe’s current Digital Agenda strategy seeks to make superfast broadband speeds of 30Mbps+ available to 100% by 2020, with 50% or more being within reach of an ultra-fast 100Mbps+ service.

Today’s changes are thus targeted towards fostering the development of faster, predominantly fibre optic (FTTx) based, internet services and preventing incumbents, such as BT in the UK, from getting “an unfair advantage” as many rival ISPs often complain. But the EC warns that “too much intervention constrains flexibility” and has decided to leave most control over next gen networks (NGA) with incumbents and national regulators.

Elsewhere one of the most controversial ideas for boosting investment, which proposed to raise or lower the cost of existing copper broadband (e.g. ADSL2+) services in a way that would make fibre solutions more attractive for consumers (original news), appears to have been left up to local regulators (i.e. it will remain a “single market issue“).

Neelie Kroes, VP of the EU’s Digital Agenda policy, said, “The evidence shows that lowering those prices will not induce greater investment in very fast broadband.” Kroes also noted that investment in fibre services was “progressing relatively well in some Member States where copper prices are around or above the EU average“.

Next the EC has proposed greater flexibility in how “next generation” wholesale products can be priced, which will be subject to “meeting strict conditions to ensure fair competition“. But this will not involved the “last-resort remedy” of “functional separation” (e.g. splitting BTOpenreach up in to an entirely separate business). Instead the EC wants Ofcom to check that an “efficient operator would be able to compete with the incumbent’s retail product on the basis of the same wholesale access products provided“.

Neelie Kroes, Vice-President of the EC, said:

“Today in Europe we stand on the brink of a new digital transition. New applications and services, from e-Health to the cloud to Connected TV, stand to offer huge benefits for citizens and businesses, and an overall boost to our economy. But many of these new ideas cannot run on copper-based ADSL broadband networks. We cannot let our networks be the bottleneck for this amazing opportunity: we need investment in new high-speed infrastructure. And for that, we need the sector that provides that vital infrastructure – telecoms companies and others – to be strong.

Over a decade ago, we successfully introduced competition to European telecom networks. The results to date have been positive for consumers and businesses. But the transition to an expensive new generation of high-speed networks, co-existing with the old, poses special challenges. Though the public sector can help, the real heavy lifting must be done by private investment. Clearly, whatever the network and whatever the operator, people need to see an adequate return before they will invest: taking into account the risks.”

On top of all that the EC will, later this year, propose new measures to cut the cost of superfast broadband roll-out’s, such as through “better re-use and sharing of [cable] duct infrastructure across sectors, and smoother permitting.” Kroes added that, “no operator would today build a copper network,” and said she wanted all industry players to, “receive the signal loud and clear – that they can invest profitably in the future connectivity of Europe, and compete on the basis of their investment“.

The new rules could have an impact upon the UK government’s strategy, which aims to make superfast broadband speeds of 24Mbps+ available to 90% of the country by 2015. Europe is understood to have expressed concern over the country’s allocation of state aid (here), which appears to favour BT, doesn’t open access to Dark Fibre and effectively excludes smaller providers. The UK’s target of 24Mbps+ is also somewhat below Europe’s.

A BTOpenreach Spokesperson told ISPreview.co.uk:

“BT has long been in favour of regulatory clarity and certainty and so these are very welcome proposals from Commissioner Kroes. BT already provides other companies with fair and equal access to its network but this is unusual in Europe. The business case for fibre is tough and most companies are unwilling to make this long term investment so the regulatory certainty being proposed is encouraging. We hope that other parts of the Commission follow the Commissioner’s lead in developing guidelines that promote investment and competition.”

As usual the devil could be in the detail. The EC expects to put its full body of formal recommendations into legal form and release it before the end of this year. Related regulatory plans are also expected to show up for validation in the autumn. But it should be said that most of the changes are aimed at countries that have less competitive markets than the UK.

EC Policy statement by Vice President Kroes
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/12/554..

UPDATE 2:51pm

Added a comment from BTOpenreach above.

UPDATE 13th July 2012

The European Competitive Telecommunications Association (ECTA), which represents alternative / smaller ISPs, has accused the EC of not being strict enough and allowing incumbent operators to retain too much freedom and control over the Next Generation Access (NGA) market (i.e. maintaining the status quo). But it has also welcomed the move to implement greater non-discrimination obligations.

Tom Ruhan, ECTA’s Chairman, said:

“We welcome and strongly support the approach to non-discrimination taken by Neelie Kroes. Abusive and discriminatory conducts of incumbent operators have a direct impact on consumers’ services and wallets. But 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.

This is a departure from the approach taken with the NGA Recommendation in 2010 and might take Europe back to the pre-liberalization era. The EU already lags behind other regions of the world when it comes to super fast broadband – an important enabler of economic growth – and these measures will set us further back.”

ECTA fears that alternative operators, many of which “will be forced to keep transferring the near-totality of their cashflows to incumbents“, could now end up being forced out of the market.