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EU Moots Softer Fibre Optic Broadband Regulation to Boost Roll-out

Thursday, September 8th, 2016 (7:27 am) - Score 738

A leaked document has revealed that the European Commission could be about to relax its regulation of the telecoms market (this would also affect the United Kingdom) in order to encourage the roll-out of faster broadband into rural areas, which might allow the use of state aid for closed networks.

The United Kingdom will remain a member of the EU for at least a couple more years’ and even after Brexit we could potentially still find ourselves being attached to some of the same rules, thus any decision that the EU makes is currently still very relevant.

At present the UK is already expected to make fixed line based “superfast broadband” (24-30Mbps+) networks available to around 97% of premises by 2019, but tackling the final 3% would be incredibly expensive and so far the only solution being proposed is a 10Mbps Universal Service Obligation (USO); this might even be at least partly met via inferior Satellite connectivity.

However we already know from another leak that the EU is expected to imminently propose a series of new targets, which will aim to ensure that “all European households” can get a minimum Internet download speed of 100Mbps (Megabits per second) by 2025, with businesses and the public sector being told to expect 1Gbps+ (here).

Suffice to say that delivering on the above could be difficult (not to mention colossally expensive), unless the EU can make rolling out into challenging areas more attractive. One way to do that would be to relax the current open access requirement, which means that any network taking advantage of state aid must ensure that other ISPs can buy access via wholesale.

Instead the leaked document, which has been seen by Reuters, appears to indicate that there could be a greater acceptance of closed networks. This is important because quite a few operators feel as if the huge risk and cost of deploying into remote rural areas is not rewarding enough if they’re then forced to do open access (i.e. allow rivals to piggyback). But that’s not the only change being considered.

The Other Proposed Changes

* The EU could generally relax broadband infrastructure regulation and put more of the power back into the hands of national regulators to police, such as Ofcom in the UK. National regulators would need to keep a tight hold and have the power to sanction operators that deviate from their declared intentions (i.e. don’t play fair) without justification.

* Operators could be encouraged to co-invest in shared Fibre-to-the-Home (FTTH/P) roll-outs in return for lighter access rules / regulation.

* Operators that build a network and adopt a “wholesale-only” model, whereby they do not themselves sell a broadband service to consumers, would also benefit from lighter rules / regulation.

The seemingly radical changes to existing regulation aren’t actually all that surprising because the EU’s new Commissioner for Digital Economy and Society, Günther Oettinger, first hinted at just such an adjustment when he took office at the end of 2014 (here).

At the time Oettinger said, “It is similar to what we are already doing in the energy sector: in some limited cases, for new pipelines, companies can be exempted from the requirement to provide competitors with access to pipelines. This is only given if they can convince the EU Commission that without that exemption the investment would not have been made.”

Even the UK’s recently agreed state aid deal with the EU (National Broadband Scheme for the UK), which will last until 2020, appears to have some allowance for so-called “reduced access” bids if no open access networks come forward, although the details are sketchy (here) and the approach has not yet been approved (still subject to an in-depth cost-benefits analysis by the end of 2016).

The challenge in all of this will be to find the right balance and to avoid fostering the establishment of mini local monopolies (not unlike KCOM in Hull), although many would argue that a local monopoly on next generation broadband access (you’d probably still have a choice between that or a slow BT copper line) might be preferable to the alternative of a restrictive 10Mbps USO or Satellite.

As ever the devil will be in the detail and we haven’t see that yet. Furthermore the proposals would still have to be approved by both the European Parliament and EU member states, which could result in further changes before we have a final policy to diagnose.

Leave a Comment
10 Responses
  1. Avatar Steve Jones says:

    Every network operator in the country, apart from BT and KCOM (and the latter case has light regulation), is already allowed to install and operate closed networks when private money is used. That includes the country’s second largest network operator (VM). Apart from investments involving public money, it’s rather difficult to see what difference this will make. There is surely no possibility that Ofcom will ease regulation on OR, and most certainly no possibility that they would be allowed to run a closed network (as US incumbents were allowed to do on fibre networks). I can just imagine the ISPs in the UK up in arms at even the slightest hint of that.

    So it’s difficult to see how this would change anything unless this relaxation of regulation eased the rules on state aid (which is, maybe, what this is aimed at and would bring howls from network operators).

    1. Mark Jackson Mark Jackson says:

      The whole article is about the impact on public state aid supported projects for remote rural areas, which is what the opening paragraph and two others clearly highlight.

    2. Avatar Steve Jones says:

      Fair enough about state aid, but the headline talks about the easing regulation on the telecoms market for fibre in general, not just the state aid part.

    3. Mark Jackson Mark Jackson says:

      Stop nit-picking at headlines 😉 , the key context will always be in the article itself (usually the first summary paragraph, as is customary).

      If you go around expecting to get all your context from just a short character-limited headline that only serves to grab attention.. well, reading the daily newspapers would suddenly become even more uniquely tedious than it already is.

    4. Avatar Steve Jones says:

      Headlines are meant to be a short summary. If the proposal is to ease regulations on state aid rules then that’s what it ought to say. That’s not nitpicking. From this it appears there is no proposal to ease regulation on telecoms markets; just on the state aid rules.

    5. Avatar Steve Jones says:

      nb. I should say that from reading the linked Reuters article it is not, as far as I can see, about easing rules on state assistance and is very much about easing regulatory rules on private investment. For instance, this which specifically mentions Deutsche Telekom and Telecom Italia being given more leeway to operate “closed” netwworks.

      “The costs of running optic fiber – which can deliver speeds of up to 1 gigabit per second – into households are high. Telecoms operators such as Orange, Deutsche Telekom and Telecom Italia have long complained that the current rules forcing them to open up their networks to competitors at regulated prices do not allow them get a decent return on investment.”

      Which gets very much back to my original point. Firstly, is there any realistic chance that Ofcom regulation would allow BT to operate closed networks? If not, what does it actually change? It also means the headline (and the first paragraph) seem to cover the main element of the Reuters article and the extension into state assistance rules is not obvious from that same article.

      So does that Reuters article mention state assistance or have I missed something?

    6. Mark Jackson Mark Jackson says:

      Agree to disagree. There is no solid standard for how you write a headline, only differing opinions and approaches with the same goal of grabbing attention (the evidence for this is pretty much all around you in newspapers, magazines etc.). You can be as creative as you like or as formal as you like and thank god for that freedom, but you still have to actually read the article for the full context. I won’t touch on this again as the discussion is frivolous.

      As to the is it / isn’t it state aid question. Our judgement based on the earlier EurActive leaks from a few weeks ago and the EC’s previous comments on their policy direction is that it does reflect state aid. But as with any leak you always take it with a pinch of speculative salt until the final policy emerges.

  2. Avatar FibreFred says:

    State aid for closed networks, haven’t we got a few fails where public funding has been used and they collapsed?

  3. Avatar Cecil Ward says:

    An aside: I certainly don’t want to see public money being used to create altnets that don’t offer wholesaling. This can mean that rural communities end up with a state-sponsored monopoly or near-monopoly. This has happened on several occasions in and around my area (Skye) in the past. I think the situation with BT Wholesale and TalkTalk Wholesale being reselling to my chosen ISP is highly desirable, and long may it remain the model.

  4. Avatar TheManStan says:

    Maybe this aimed more for Deutsche Telecoms benefit???

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