Following the broadband money

Incumbent telcos leech cash from altnets, starve broadband market

with 14 comments

Europe’s incumbent telcos are sucking all the cash out of what is meant to be a competitive market in telecommunications infrastructure, endangering the chance that the union will meet its Digital Agenda targets of 30Mbps for all and 50% of citizens using 100Mbps broadband by 2020.

Members of ECTA, the association of “challenger” or altnet telcos, have asked Digital Agenda champion Neelie Kroes to force incumbents to cut the price of renting incumbents’ copper lines.

“At the prices charged for copper, all the cash flows have gone to the incumbent, and entrants have been persistently cashflow negative. In Portugal, we understand there are now no active competitors using unbundling, whilst in Poland there is only one remaining altnet,” ECTA director Ilsa Godlovitch told Br0kenTeleph0n3.

While local loop unbundling appears to have been a disaster in Europe, the same may become true for fibre access.

Incumbents argued previously that they need high prices for copper lines to fund fibre roll-outs. ECTA told Kroes yesterday most incumbents are not installing fibre to households, but are only installing fibre to cabinets (VDSL). This cost relatively little and could undermine competition by limiting altnets’ ability to unbundle the incumbent’s access network, they told Kroes.

“Many incumbents installing VDSL have been able to retain nearly 100% market share of these (local) lines, a position which would strengthen their dominant position even further in years to come,” they said.

Share of unbundled sub-loops and VDSL WBA lines of total number of FTTN/VDSL lines of the SMP operator (in %). Mid 2011
Access to the unbundled sub-loop Wholesale broadband access to VDSL connections Total
AT 0.00% Partially no access 0.00%
BE No access No data available 1.00%
CH 0.00% No access 0.00%
DE No data available No data available 8.10%
DK No data available No data available No data available
ES 0.00% No data available 44.70%
FR No FTTN/VDSL roll-out No FTTN/VDSL roll-out No FTTN/VDSL roll-out
HU 0.00% No data available No data available
IE No access No access 0.00%
IT No FTTN/VDSL roll-out No FTTN/VDSL roll-out No FTTN/VDSL roll-out
NL 0.00% 0-5% 0-5%
PL 0.00% No data available No data available
PT 0.00% No data available No data available
RO 0.00% No access 0.00%
SE 0.00% No data available No data available
TR 0.00% 0.50% 0.50%
UK <1% Partially no access No data available
Source: WiK Consult

ECTA chairman Tom Ruhan said, “The liberalisation experiment which Europe began in the late 1990s is close to failing.”

Regulations do not help even leading telecoms competitors. Without change Europe might go back to monopolies and duopolies for broadband services within five years. “This will not deliver more investment in broadband and will have a negative impact on the services and prices consumers receive,” he said.

The European Commission is redeveloping its ideas on wholesale charges and competition in the telecoms sector. Incumbents have challenged proposals that would compel them to invest in fibre to homes in exchange for retaining higher charges on their legacy copper infrastructure.

CEOs of altnets, which according to the FTTH Council, currently operate 55% of Europe’s FTTH lines, argue that incumbents have been receiving subsidies for years, and have drained competitors of capital, yet have failed to modernise their networks.

ECTA said these views did not represent those of ECTA members who are also incumbents, such as BT and Danish telco TDC. It is unlikely this difference can or will be resolved.

All ECTA members generally support the principle of open wholesale access to incumbents’ networks at home and abroad.

Now, if they can just get beyond their cosy gentlemen’s agreement not to rock the boat in each other’s home markets, Kroes might see her dream fulfilled.


Written by Br0kenTeleph0n3

2012/05/22 at 07:02

14 Responses

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  1. Agree with ECTA. In the UK all the digital switchover money seems to be going to the incumbent to install cabinets to prolong the life of the phone network instead of going into innovative and futureproof infrastructure. They are effectively protecting their monopoly for another decade. Its not as if they need the funding but they are hell bent on stopping any altnet getting it. Granted the cabs will give a few a quick speed boost, but the cost to the nation is to be left in the global slow lane of the future with many still left on the wrong sided of the digital divide due to the limitations of copper over distance.


    2012/05/22 at 07:24

  2. Chis – Do you agree there should be more money to FTTP all of the UK? Some facts about the numbers needed would also be helpful.

    Compared with other countries in the table the UK seems to be better with <1% and 'partially'!


    2012/05/22 at 16:11

    • Somerset, I agree with comments you have put elsewhere, there is more sense in putting money into internet infrastructure than for HS2, but not sure we can afford to do fttp everywhere in this age of austerity – what I am saying is that we shouldn’t waste what money we have on cabinets for a few to go a bit faster and the digital divide to widen.
      If the incumbents want to do cabinets then fine, but any funding available should go to getting fibre to rural areas, homes, businesses and masts, and the playing field should be levelled so new entrants to the market can provide some much needed competition to a lazy incumbent who has not kept pace with modern needs and demands.
      We need some decent altnets. They should be helped and encouraged by whatever means possible.


      2012/05/22 at 16:19

      • If the funding is, so far, limited to the existing BDUK amount what FTTP would it achieve? A list of what, specifically, would be needed to ‘level the playing field’ with £numbers would be useful.


        2012/05/22 at 22:45

      • Firstly, the budget isn’t just what BDUK has to spend – see Secondly, who would find a list of things to do to “level the playing field” useful? Investors don’t care if the playing field is level or square or whatever, as long as it is consistent. Most would like a monopoly. If the government decided to take Openreach out of BT and give it the job of providing FTTH, I’m sure the infrastructure funds and pension funds and even some hedge funds would be more than interested.

        Ian Grant

        2012/05/22 at 23:53

      • Chris said about the playing field, what does this mean in detail?! How would a separate Openreach operate differently? As a company with shareholders like BT?


        2012/05/23 at 07:31

      • Plenty of choice, but I doubt swopping a BT-owned monopoly for a another privately owned monopoly in which BT, CWW, VM, etc could buy shares would be desirable.

        Ian Grant

        2012/05/23 at 12:29

      • How would the government take Openreach out of BT and presumably would also take the infrastructure of VM, C&W etc.? Conservative government nationalises UK company…


        2012/05/24 at 20:02

      • Perhaps there’s no need. Ofcom just needs to tell Openreach it has to accept connections that meet Active Line Access ( standard. We can talk about transmission fees, but they should be in the pence per gigabyte range..

        Ian Grant

        2012/05/24 at 20:58

  3. The irony is that if an Altnet has provided a local solution, like Gigaclear, then EU rules state BDUK’s funds can’t be used in that area .

    Mel Bryan

    2012/05/31 at 13:52

    • Quite a few altnets are being ignored, and councils are using BDUK funds in their areas. A lot of this is going to come out in the wash over the next year. Large wifi networks already in existence could have their main customer base wiped out if cabinets are deployed in larger suburban areas. That could endanger their more rural customers and leave them without a connection from anyone. The cabinet technology won’t help rurals. This is similar to what happened in 2003/4, small amounts of funding went to rural communities who built networks because they couldn’t get a connection, then the incumbent decided to enable exchanges in those areas after all and it wiped a lot of them out. The game is being played again, and this time the councils are scared of smaller projects, so they are just giving in and handing funding over to the incumbent. This effectively throttles any innovation. The good thing is that we remember the past and have learnt from it. The bad thing is that government hasn’t.

      Chris Conder

      2012/05/31 at 14:07

      • You were there then, the government wasn’t. Where are the civil servants, who are meant to hold the corporate memory? Who wrote the history? Who teaches the lessons learned?

        Ian Grant

        2012/05/31 at 16:11

      • ah. hadn’t thought of that Ian. 😦

        Chris Conder

        2012/05/31 at 16:13

  4. […] Other firms, such as TalkTalk and Sky, simply rent BT’s local access networks to deliver TV, broadband and voice services to customers. The rent they pay BT, or rather Openreach, ensures that BT still profits from the transaction. This is common practice throughout Europe […]

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