EU Seeks Boost to Fiber Investment, but Viability Questions Remain
BRUSSELS -- With interest in fiber network rollout on the upswing, the European Commission (EC) will this summer propose a plan to boost investment in broadband, officials said Wednesday. It will come in the form of guiding principles for next-generation access (NGA) regulation for the next five years, Information Society and Media Commissioner Viviane Reding said at a European Competitive Telecommunications Association workshop on policies and strategies to boost fiber penetration. But despite consensus on the need for fiber infrastructure, many questions about its financial viability remain, speakers said.
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Reding’s recommendation will be based on three key principles, she said. Access rules imposed in the past on dominant network operators will be continued, extended and, if necessary, reinforced if a dominant player switches to a next generation network, because technological change shouldn’t of itself lead to different rules, she said.
To encourage investment in NGAs, the recommendation will set out several principles for national regulators to consider when regulating access prices for next generation networks. Reding favors a risk premium of around fifteen percent, she said. The third principle will be for regulators to impose openness requirements on operators with significant market power to prevent them from thwarting or delaying alternative infrastructure investments or destroying the competitive potential of new entrants, Reding said.
The time is ripe for the EC proposal because investment in fiber networks is picking up, said Bernd Langeheine, director of electronic communications policy for the EC’s Information Society Directorate. Companies need regulatory predictability and regulators need guidance on the new markets they're assessing for competitiveness, he said. Among other things, the proposal will address the role of national regulators, fiber-to-the-home (FTTH) and fiber-to- the-node, and the need to retain bitstream requirements, he said.
Is Fiber Viable?
Although fiber networks are rolling out in several EU states, there’s uncertainty about just how competitive they will be. It’s difficult to see how FTTH deployment can reach beyond 30 percent, said Richard Feasey, public policy director of Vodafone, which is beginning to think about fiber. There are questions about how the economics of fiber rollout can be improved upon, and whether average revenue per user can be boosted high enough to push fiber deployment, he said. Fiber enthusiasts also must believe in 30 percent-plus market shares for non-incumbents, he said. The only sector where those shares occur is mobile, he said.
Most markets won’t be able to sustain a second FTTH or VDSL operator, said economist Taylor Reynolds of the Organization for Economic Cooperation and Development, stressing that his views were his own. The topology of the underlying network is what matters, he said. Getting it wrong will affect how competitors’ share access, whether the size of street cabinets becomes an issue, and whether lines can be unbundled to allow FTTH, he said.
WIK Consulting studied the cost, degree of profitability and replicability of NGAs in six EU countries. It found that nationwide deployment of NGAs wasn’t profitable in any of them, said General Manager Karl-Heinz Neumann. Incumbents who launch fiber networks are better placed than new players to make such investments on the large scale required, and can take advantage of lower costs, he said. Without regulatory intervention, however, the chance for another entrant to build out a network is rather limited, he said.
The study also found that duct and dark fiber access makes replication of an NGA more possible but isn’t enough to spark viable competition, Neumann said. However, full local loop and sub-loop unbundling can increase the chances for success, he said. The question in existing networks is how to give competitors access to existing network elements, he said. The question for NGAs is how to structure the network elements to give them efficient access opportunities to compete, he said.
British Telecom wants the EC to pay more attention to pan-EU services for multinational companies, said Grant Forsyth, head of EMEA regulatory and global interconnection, BT Global Services. Multinationals face obstacles such as the lack of Ethernet services in some European countries and high wholesale prices, he said. Next-generation networks can make Ethernet access more ubiquitous and provide more consistent quality of service, he said. But if the entire focus of fiber investment is on consumers, none of this will happen, he said.
Research shows a need for service-based competition to support competitive business services throughout Europe and globally, Grant told us. Providing access only to network infrastructure won’t support those services, he said. However, comments by several speakers Tuesday signal BT’s message “is starting to get through,” he said, but it will take more than “opening up the sewers of Paris” to fiber.