EU Regulators Encourage Co-investment in Fiber Networks


Learning from the past and to adapt more practically suitable solutions to the telecom markets in its member countries, the European Commission is working towards relaxing rules that will encourage telecoms companies to open up their networks if they show a willingness to co-invest with rivals in superfast broadband. The current set of fifteen-year-old telecommunication laws would be reviewed by experts in 2016 September. European Commission wants to revise laws so that rivals would be forced to co-invest and hence the networks would be open.

One of the major oppositions to open access network is from the owner of the network. The most recent case of resistance to open-up the network came from Deutsche Telecom (DT) when the European Commission asked the German regulator raised concerns over DT’s plans to go ahead with instead of investing in new fiber networks, a move that will limit its rivals from using its network. DT has made it clear to its rivals that it is not willing to open up the networks for them and suggested they invest in building own networks.

Sharing of networks has many benefits such as bringing down the service charges over a period of time, ensuring smooth competition among rivals, the choice for subscribers to choose service provider without hassles of long-waiting, etc. Subscribers will be free to switch between service providers since a common network would be utilized by different service providers. This, in turn, reduces the carbon footprint in the network. The open-access or sharing of networks is environment friendly, which demands less overall investment. At the same time, the concerns of operators who had already invested heavily to build network should also be taken care

European Commission’s current decision to promote network sharing concept is a shift from its main purpose, which has focused on allowing new entrants to compete on a more level playing field with former state-owned monopolies. The costs of running optic fiber cables to home that can deliver speeds of up to 1 gigabit per second into individual households are high and telecoms operators such as Orange, Deutsche Telekom, and Telecom Italia have long complained that the current rules that force them to open up their networks to competitors at regulated prices do not allow them to get a decent return on investment.

Efficient investment projects which are based on open, good-faith and reasonable co-investment ensure maximum utilization of infrastructures. This is the model already adopted by France, where Orange, Numericable SFR, and Free have all offered to do shared rollouts of fiber-to-the-home in some urban areas. Operators who do not participate would still be able to ask for access later, of course on less favorable terms. Companies that own legacy copper networks would still have ownership monopoly, but rivals would equally have the benefit of long-term access to the network on good terms.

Some smaller players in the market might prefer to ask for access later rather than footing some of the bills of building the infrastructure. Equally, incumbents would prefer to go it alone but the high costs of rolling fiber out to households make that difficult. One of the studies conducted by investment banking giant Goldman Sachs reveals that the FTTH deployment cost in Europe is between 500 to 800 euros per subscriber. At the same time delivering 800 Mbps, broadband services using vectoring technology comes around 300 euros per subscriber. Vectoring technology utilizes existing copper cables. Since the vectoring technology limits competition and supports monopoly, the European Commission does not support and has signaled its displeasure to Deutsche Telecom.

European Commission has made it clear that they do not pick winners in any market and there should be harmony among competitors since it is evident that everybody needs fiber broadband. Operators rolling out fiber-to-the-home could see a more favorable treatment from regulators. European Commission also wants to reward companies who adopt a “wholesale-only” model, whereby they sell access to their networks to other firms and do not offer consumers their own retail broadband packages.

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