Fund fibre from incumbents’ excess profits, Kroes told
Incumbent telcos should not be allowed to continue to charge excessive prices for their copper networks while they refuse to build fibre networks, would-be competitors told Europe’s Digital Agenda champion Neelie Kroes .
Kroes opened the European Competitive Telecommunication Association (Ecta) annual regulatory conference earlier today. She is leading a European Commission consultation into funding of high speed broadband networks. One of its proposals is to allow incumbent telcos to increase the prices they charge for copper-based services in order to fund fibre roll-out.
Ecta chairman Tom Ruhan told Kroes that the extra profits telcos make from “excessive cooper pricing” has not led to incumbents installing fibre. Instead the excess profits are being distributed as dividends to shareholders and used to invest in non-European businesses, he said.
His comments are grounded in a study commissioned by Ecta from WiK, a German consultancy, and reported in April. This found that wholesale charges in some countries are double the amount that it actually cost incumbent operators to build the networks decades ago.
Ruhan said there is no justification for paying more than the real cost of copper networks, when incumbents are failing to invest in new high speed infrastructure.
He called for any profits incumbent telcos make from overcharging to be put into a general fund that all network operators can use to build fibre networks in that country.
“Dominant operators that receive excess profits from their legacy networks … should pay the money back by reducing charges on high speed fibre networks. Alternatively, the money could be channelled into a fund available for other potential investors in open fibre networks,” he said.
WiK found that regulators had allowed incumbents to base their cooper prices on current replacement costs rather than historic costs, ie to ‘sweat their assets’. This meant there was no incentive for them to invest in fibre. Wik found that incumbents had invested in fibre only when faced with serious competition, mainly from cable TV companies.
The commission’s consultation on wholesale charging methods ends 28 November. The commission is expected to produce a recommendation in 2012.