Despite EU Race to Ubiquitous Fast Broadband, Telcos Say Business Case Far From Clear
LONDON -- The European Commission’s push for high-speed broadband for all worries some ISPs, because the business model isn’t there, several speakers said Tuesday at the IIR Telecoms Regulation Forum. The EC expects private-sector investment to be primarily responsible for delivering the ultra-fast speeds envisioned by the EU 2020 agenda, possibly with help from the public sector in areas where companies are unwilling to build out networks, said Antti Peltomaki, deputy director general of the Information Society Directorate General. It’s far from clear whether, if operators build fiber networks, users will come, representatives from France Telecom and Telefonica said. The conference ends Wednesday.
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There’s strong pressure from the EC and national governments for total broadband coverage, and the digital divide is no longer politically acceptable, said Francois Comet, Orange France Telecom deputy chief regulator officer. If telecom operators are to develop very high-speed broadband, they need public financing, either from the EC or EU countries, he said. The EC must be pragmatic about the situation, he said. There’s also a problem with demand, he said: 30 percent of the population doesn’t use the Internet now, a figure the EC wants to cut in half.
The EU broadband regulatory package doesn’t address the next-generation fiber business case, because the business case “doesn’t stack up,” said Robert Mourik, Telefonica European regulatory policy director. EC broadband penetration targets make Mourik cross, he said, because they put the onus on operators to invest and take the risk. Without a better business model, investors won’t want to fund fiber networks, he said.
Several factors are hampering fiber rollout, Mourik said. Very few houses are connected to such networks because many people prefer to continue using the copper lines, he said. Another problem is that manufacturers want operators to invest in fiber, but many services run on copper and can’t be migrated to fiber, he said. More research and development is needed to allow such transition, he said. Even when migration is possible, operators must deal with people like “my granny,” who just wants voice over copper, he said.
There are also operational issues, Mourik said. It now takes eight hours to install a fiber connection, versus 20 minutes for copper, he said. Operators must become more efficient to make fiber worthwhile, he said. Another issue is that even if fiber is deployed to the front door, it’s unclear how to achieve in-house distribution in apartments and other buildings, and who will pay to install it, he said. On the demand side, most users are happy with their copper services and it’s unclear what will convince them to embrace fiber, he said. We live in an “optimistic industry” that believes that if it rolls out the fiber network, people will use the bandwidth, said Comet. At the moment there are no services that are deliverable solely by fiber, so they're being sold at copper prices, a serious challenge, he said.
There’s a “perfect storm” now of a major technological shift and the emergence of new business models, said Goran Marby, director general of the Swedish National Post and Telecom Agency. Many of the old debates will evaporate in an all-Internet Protocol world, he said. But IP networks carry their own risks, he said. Cutoff of a fiber line terminates all services, he said, and not everyone has access to high-speed Internet. If that isn’t fixed, some users will lose their existing ability to make phone calls or watch TV, he said.
Operators’ pessimism is disappointing, Marby said. His agency believes everything will be IP in the future and that telecom companies must assume that if they build high-speed networks, consumers will want to use them, he said. The sector is at a turning point now, and demand for broadband, at whatever speed, is going to grow quickly, he said.
The EC has done all it can to provide an environment for private investment, said Ilsa Godlovitch, director of the Brussels office of the European Competitive Telecommunications Association. Private investors must now be more honest about the business models for fiber, she said. If the fiber model is to work, there must be a single network, and it, like other utility networks, must be built to last, she said.
On the demand side, the most important element is competition, Godlovitch said. The market must discover what services consumers want and sell them at reasonable prices, and that will drive take-up, she said. Use of fiber will then stimulate investment, she said. There might be more fiber funding today if more EU governments were complying with the EU next-generation access recommendations, she said. Godlovitch urged regulators and operators to stop ignoring business customers. Many small companies are making do with ADSL when they could do much better with fiber, she said.