Kroes to restore monopoly telcos, screw consumers, says ECTA
ECTA, the altnets’ organisation, today accused Digital Agenda champion Neelie Kroes of turning her back on a competitive market in telecommunications in Europe.
This raises the question of whether she has abandoned her targets of universals access to a 30Mbps broadband service, with half the population using a >100Mbps service by 2020.
ECTA, which represents more than 100 non-incumbent telcos (as well as BT), said Kroes’s attitude to pricing of copper access and ‘regulatory holidays’ for next generation fibre networks would harm competition in broadband markets and would eventually harm consumer interests without fostering investment.
ECTA chairman Tom Ruhan welcomed Kroes’s approach to non-discrimination. “Abusive and discriminatory conducts of incumbent operators have a direct impact on consumers’ services and wallets,” he said.
He regretted her ideas about pricing. “Incumbents will not only be allowed to regain full monopolies on future networks, they will also be allowed to continue overcharging consumers and starving competitors on existing networks,” he said in a statement.
This could take Europe back to the pre-liberalised era, he said. If he’s right this could follow the US, where AT&T and Verizon have carved up the broadband market between them.
Researchers estimate that consumer prices are too high by €25bn because of “abusive behaviours of incumbents in wholesale markets”, he said.
“Hard-core pricing abuses and discriminatory behaviours of incumbent operators have been punished recently by the Commission. However, this happened years after the abusive conduct started. The non-recoverable harm to the market and to competitiveness makes strong ex-ante intervention necessary.
Ruhan welcomed the new “margin squeeze” test and the move towards Equivalence of Inputs on pricing. But Kroes’s approach to asset pricing policy is “catastrophic for competitors, for consumers and for the competitiveness of our economy”, he said.
In a policy statement that follows two consultations, Kroes said today the most reliable “buy or build” signals for investing in efficient alternative infrastructure come from a long-run incremental costing method, including an appropriate amount for common costs.
“The appropriate ‘modern equivalent asset’ for calculating copper access costs seems to be a fibre network: after all, no operator would today build a copper network,” she said.
She added that consumers will come to place greater value on what they can get from (fibre) networks; copper prices should adapt then on the basis that ‘you pay for what you get’.
“Where NGA networks are price-regulated, regulation should address investment risks by aiming at full cost recovery in such infrastructure even if future costs decline,” she said.
Ruhan said that incumbents had had access to fibre and “regulatory holidays” for years but they had still not invested in fibre to the home, and kept asking for more taxpayers’ money. “Incumbents have been only partially upgrading their networks (VDSL) and re-building their monopolies on future broadband,” he said.
“The incumbent retail broadband market share of VDSL lines in the EU is close to 100%. There is no reason to believe that, without competitive pressure, incumbents will give up their goldmine legacy network to invest in Europe.
“Investments will take place in more attractive emerging economies and short-term, yield-hungry banking investors will continue to be rewarded with more than half of incumbents’ cash-flow,” Ruhan said.
He said altnets, which are currently the major investors in fibre to the home (FTTH) networks, will have to keep paying nearly all their cashflows to incumbents. Many will be simply forced out of the market, he said.
“The proposal on pricing is a U-turn on the pro-competitive approach previously taken by Mrs Kroes and risks setting Europe back to ‘last in class’ in high speed broadband by undermining competition without incentivising more investment,” he said.
Kroes has a lot on her plate. Yesterday she proposed a multi-country copyright licensing programme for music. This is a first step to a more general review of how European copyright rules work in the digital age.
“We already have ambitious legislative proposals on data protection, online dispute resolution, online sales contract terms and electronic ID, and will soon adopt a strategy for cloud computing, initiatives on online payments and the eCommerce Directive, policy work on Connected TV, guidance on net neutrality, legislation on network security and much more,” she said.