Legacy Telcos and New Entrants Urged to Stop Squabbling and Build Networks to Meet Massive Consumer Demand
BRUSSELS -- Telecom companies must stop bickering and speak with a single voice if they want to reach their potential as a driver of growth in the European economy, several speakers said Monday at the Financial Times/European Telecommunications Network Operators’ Association digital agenda summit. Considering the “tremendous investments” needed to accomplish the digital agenda, “critical mass is required,” said ETNO Executive Board Chairman Luigi Gambardella. “The minor fights between incumbents and the cries of newer entrants over a few eurocents of access charges belong to the past,” because both sides have a common interest in rolling out the new networks needed to meet consumer demand for new services, he said. But incumbents and their rivals sparred at the meeting over a European Commission proposal to dictate access charges to copper networks.
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No one disputes that Europe needs the right infrastructure to deliver bandwidth-hungry services and applications to drive future growth, but there’s no agreement on how to encourage deployment of such networks, said EC Digital Agenda Commissioner Neelie Kroes. For the time being, “unfortunately,” telecom providers are reluctant to roll out fiber, she said. Most think this is largely due to the existence of the competing legacy copper network and that copper pricing plays a key role in fiber investment decisions, she said. But operators are divided on what impact copper access prices have on incentives for fiber build-out, she said.
Alternative players think access charges are too high, given the depreciation of legacy networks, and that incumbents prefer making easy profits off their old networks to building new ones, Kroes said. They think lower access prices will create an incentive for incumbents to move forward on fiber, she said.
Incumbents argue that much lower copper access prices will erode broadband retail prices and make it harder to charge the higher prices for competing fiber products needed to cover investment and risk costs, Kroes said. They don’t want to invest in a parallel fiber infrastructure that directly competes with a cheap copper line at a time when most consumers don’t appreciate the major differences between the technologies, she said.
There’s some truth on both sides, Kroes said. In a consultation launched Monday, she’s seeking input on the incentives needed for incumbents to invest in next-generation networks. Models could combine an approach to gradually lower access prices for mostly depreciated copper networks with the possibility of granting exceptions from that rule when incumbents credibly commit to invest in fiber in a relevant time frame while promoting switch-off of the copper lines, she said.
Meanwhile, the to-ing and fro-ing continued. Forcing incumbents to cut prices they charge competitors to access the copper networks will motivate them to build fiber lines for which they can charge higher rates, said consultant and former European Competitive Telecommunications Association Chairman Innocenzo Genna in an interview. New entrants like what Kroes is saying because in the short term lower copper access prices mean more money for them to invest in new infrastructure, he said. It took a long time for the EC to grasp the connection between copper access charges and investment by major incumbents in fiber, he said.
Incumbents refuse to make money for their rivals, said Telefonica CEO Cesar Alierta. With copper markets only 10 percent of their business -- most of which is mobile -- it’s “ridiculous” to regulate the legacy network market, said Telekom Austria Group CEO Hannes Ametsreiter. Network owners need incentives to invest in the right infrastructure, which should be a combination of fixed and mobile, he said. Kroes’s proposal to disincentivize copper networks is “incredible,” said Telecom Italia CEO Franco Bernabe. The problem of encouraging operators to create fiber networks is “plain vanilla,” he said. Incumbents are getting hit with more taxes, regulation and bad operating environments when they need less, he said.
Europe’s telecom sector is having a hard time ridding itself of old habits, said Alcatel-Lucent CEO Ben Verwaayen. Telcos must speak with one voice instead of bickering with each other, he said. Unless industry gets out of its ETNO/ECTA “standard stories,” the world will ignore it, he said. Gambardella was right, he said: “We need industry to have an answer with a fist.”