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Following the broadband money

Cut copper prices to boost fibre, regulators told

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The main reason there is so little fibre in Europe is because incumbent network operators are making too much money from their copper networks, and financiers don’t want to upset that cash flow.

If Europe is to achieve the aggressive targets of the Digital Agenda, it must find a way to cut the value of copper and reduce the perceived risk of rebuilding the existing networks with fibre.

This emerged at the European Competitive Telecommunication Association conference on how to kick-start fibre investment in Brussels.

Andreas Weiss, managing director and head of telecommunications, media and technology at investment bank WestLB, said the banks’ preferred borrower was a monopoly with strong, profitable and predictable cash flows. “It’s the top line and then the bottom line that’s important to us,” he told delegates.

Weiss was replying to a question on whether financiers would like to see governments renationalise or create monopoly suppliers of passive broadband infrastructure, a development now underway in Australia.

Karl-Heinz Neumann, general manager and director of WIK Consult, and author of an exhaustive analysis of the effect of wholesale pricing on fibre roll-out, said incumbents were responsible for only 19% of the present investment in fibre, even though they would benefit most by it. “Altnets” (alternative network operators) had spent 73% because they did not have a copper legacy to protect and exploit, he said.

The Digital Agenda calls for 50% of Europeans to have access to 100Mbps broadband by 2020. For this to happen, the wholesale price of copper has to drop from its present average of €8.55 to €6.02 to encourage new build (greenfield) fibre investment, and to €3.42 if the altnet had affordable access to the incumbent’s ducts, poles and other passive infrastructure (a “brownfield” scenario), Neumann said.

If the present access price for copper was firm, fibre network operators would have persuade consumers that the €19.90 access price was worth it, he said.

Neumann called for regulators to give firm and credible timetables to incumbents indicating how and when they would have to cut the wholesale price of copper.

Fibre now reaches just 3.9m (2%) of the total homes in Europe, although it passes 22m, giving a 17% penetration rate. In the UK, BT’s penetration rate is under 3% (144,000 out of 5m homes passed), although it is aiming for 20%.

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