With the most certain boom in internet access technologies, a new line of fiber rollouts and growing user numbers, telecommunication regulations are becoming outdated. International regulators are trying to formulate a new approach but as we saw in WCIT event in Dubai last week, this is not an easy task. And the debate is not restricted with the UN policies. Even in EU, which is formed by 27 member countries and therefore much easy to reach a concensus, telecommunication regulations itself is a very delicate and tricky issue.
For example, Neelie Kroes, European Commissioner for Digital Agenda and one of the several Vice-Presidents of the European Commission, recently has confirmed that telco incumbents in Europe will not be reprimanded for using copper pricing as a barrier to rolling out fibre networks. It is apparent that she prepared a draft proposal. This proposal was not public initially but it has been published now [1] and regarded as a fundamental reform of the Commission’s policy in the matter of broadband and NGA.
But this proposal is a 180 degrees change in tone compared to the October 2011 Kroes’ approach to the matter. Alternative operators and small ISP’s are fearing that monopoly-era is coming back. We interviewed with Mr. Innocenzo Genna, the former Chairman of ECTA (the European Competitive Telecommunications Association) about this sudden change of tone.
turk-internet.com: In one of your articles, you say that the new draft from EU Commisioner Neelie Kroes is proposing to fix the access price of traditional copper networks for 8 years. This, actually, contradicts to Neelie Kroes’s October 2011 approach. She called on large telcos to stop using copper pricing as a barrier to deploying fibre networks that time. What do you think has made her change the tone between October 2011 and December 2012?
Innocenzo Genna: I believe there was a strong pressure deriving from various sources: incumbents (not willing to invest in fibres and more inclined to preserve the cash flow of the copper network); financial community (banks and funds interested in keeping incumbents in good stand, in order to continue to perceive dividends and bonds reimbursement from them); politicians (wishing to keep employment level within large incumbents, and scared about possible take-over by non-European telcos, like Telmex and China Telecom). Kroes took a pure political decision, aiming at preserving the financial stability of the incumbents “and concerned financial community”, while she completely renounced to the possibility to force incumbents to invest in fibres. They are politically too strong.
In her proposed plan, there is nothing which can induce incumbents in switching-off copper networks and replace them with fibres. To the opposite, the economics resulting from this plan grant to copper network a second life, because such old infrastructure, despite depreciation, will be expected (by way of regulation) to provide a stable and even growing cash flow for the next 6-8 years. Under such conditions, replacing the copper networks with something else would be illogical for incumbents. And in fact, incumbents are already now reacting by upgrading their network via VDSL, a copper-based technology which would have been used in any case when the life-time of the copper infrastructure expires.
Kroes is aware that at the end of her mandate (2014) the achievements in terms of fibres investments will be poor. However, she is already prepared for such a scenario: she will try to show VDSL deployment as an interesting result, and she will present fix and mobile investments as part of an unitary picture (in fact, mobile investments in LTE may compensate failure in fibres investments). Even if citizens and consumers will complain, incumbents and part of the financial community will be on Kroes’ side, and this will reduce the negative impact on the media. This is a pure political reasoning, nothing to do with regulatory policy.
turk-internet.com: In some countries like UK, there are rural broadband rollout plans with using state funds. But again we see that only bidders for those funds and projects are incumbent operators, not the alternative ones. What do you think about that?
Innocenzo Genna: In various European countries various altnets (telcos, energy companies, municipalities) are engaged in fibres roll-out, also with the support of public funds: France, Italy, Netherlands, Norway, Romania for instance. When altnets do not participate to the tender, this might be due to various reasons, including the conditions set by the granting authority, which could have been drafted in a way to favor the local incumbent. The European Commission recently started an investigation vis-à-vis a public financement granted in Italy to the local incumbent to roll-out a fiber network in the province of Trento, because the altnets might be excluded for competitive reasons.
turk-internet.com: You describe how and why Kroes plan has misunderstood the market and why it will bring back monopollies if applied. What is you proposal then?
Innocenzo Genna: There is no single magic solution for fibre roll-out, while a complex combination of positive and negative conditions must occur altogether, just to make a non-exhaustive list:
- Competition (from cable of ULL: evidence show that only in cable or competitive countries incumbents invest in fibres like altnets);
- National plan for copper switch-off (coexistence of copper and fibres in the same area is an issue);
- Economic incentive for migrating from copper to fibres (this means that copper price cannot be too high, otherwise such migration will never took place);
- Tax and financial incentives for building infrastructures;
- Civil engineeringfacilitations;
- Driving services (demand for IPTV);
- Demand incentive (discount to buy computers, digitalization of school and healthy activities).
The problem is that a telecom regulator may influence only a part of such factors, therefore a cooperation with the government is necessary fore the rest. In addition, one should consider that deployment of fibres networks at national level and at market conditions is a completely new experience for incumbents operators, which never invested in networks: in fact, the current copper network was built during the monopoly-era and it was financed by taxpayers, and then passed to the incumbents; GSM mobile networks have been financed by mobile termination. LTE is an upgrade of the GSM network. Therefore, in the past incumbents never invested their money in networks and are reluctant to do it now with fibres.
For Turkish translation of this article please see : AB’nin Fiber Geçiş Regülasyonları Hakim Operatörlere Avantaj mı Sağlıyor?
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