Br0kenTeleph0n3

Following the broadband money

Give us all your money, telcos to tell Kroes

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Incumbent telcos are expected to try to extend their regulatory holiday on installing optical fibre networks when they report back to European Commission VP and Digital Agenda champion Neelie Kroes tomorrow.

Earlier in the year Kroes invited telco CEOs to tell her how to kick-start investment in fibre networks so that all Europeans would have access to 30Mbps broadband with 50% using 100Mbps by 2020.

Tomorrow CEOs from Deutsche Telekom (for telcos), Alcatel Lucent (for equipmentuppliers) and Vivendi (for content providers) are expected to deliver a statement of 11 “principles” that address industry structure, approaches to “net neutrality” and regulation of “next generation” fibre networks.

The amount required is estimated at between €200bn and €300bn over the next 10 years. Given the sovereign debt crisis engulfing southern Europe, it is likely that money from governments is likely to be in short supply.

At the recent Ecta (European Competitive Telecoms Association) conference on triggering fibre investment, representatives from the funding community were plainly willing to lend, even to buy existing copper networks. They preferred to see their risk reduced by having fewer fibre network operators, and when Br0kenTeleph0n3 pushed, they admitted they would prefer to invest in a monopoly network operator.

The conference also showed that incumbent operators do not invest in fibre until forced to do so by competitive offers. At present the competitive threat came almost exclusively from cable network operators with their mix of fibre backbones and co-axial local loops, said Karl-Heinz Neumann, one of the authors on an exhaustive analysis of wholesale access pricing of copper and fibre.

Depending on whether new entrants have access to the incumbent’s passive infrastructure such as ducts and poles (or other utility suppliers such as energy), fibre networks were between 20% and 35% more expensive to install than copper, Neumann told Br0kenTeleph0ne.

However, fibre delivers vastly more raw speed than copper. BT’s Sean Williams told the conference copper will achieve 100Mbps within five years. besides which it was quicker to use copper to deliver incrementally higher speeds.

But a fibre to the home (FTTH) service could start from 100Mbps, speed upgrades are vastly cheaper and quicker to implement than with copper, and general running costs are said to be lower with fibre than with copper.

Ecta, which represents more than 100 “entrant” telcos, has long argued for there to be a single fibre network in each country, or ideally, across Europe, and for each operator to have “open access” to the physical network.

Speaking ahead of the meeting with Kroes, Ecta chairman, Tom Ruhan said, the “de facto” regulatory holiday for fibre networks in many countries had not led incumbents to invest more. “It is time to recognise that in most cases, including in cities, the market can only support one fibre network alongside any cable networks that already exist,” he said.

Ruhan called for an end to the regulatory holidays for fear that Europe would slip behind competitor economies. “Regardless of whether the fibre is owned by one operator or several ‘co-investors’ the network needs to be open and the regulatory rules must be clear,” he said.

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Written by Br0kenTeleph0n3

2011/07/12 at 16:16

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