Following the broadband money

Kroes to restore monopoly telcos, screw consumers, says ECTA

with 5 comments

Kroes – telco monopolist, claims 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.


Written by Br0kenTeleph0n3

2012/07/12 at 20:40

Posted in Uncategorized

5 Responses

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  1. Reading between the lines of the statement from Brussels, don’t you think it says that the incumbents will be left to stew, and funding for altnets will be given to provide incentives for fibre in rural areas? That is how I read it. Not funding to patch up ISPs reselling from the incumbent, but funding/support/regulations reform for innovative new networks built with fibre.

    Chris Conder

    2012/07/13 at 06:47

  2. I wish I could see as clearly as you, Chris. I am struggling to understand exactly WHAT is going to happen and when in real terms and in fact I am struggling to detect any definitive ‘lines’ in her statement – but I confess to not really understanding the whole thing which does not help…………….. Of course we still have the parallel ‘mountain to climb’ on the basic policy for state aid wrt the UK, on which I believe the UK expects “agreement with State Aid in July with formal sign off in September”, but of which I see no sign.

    Mike Phillips

    2012/07/13 at 07:13

    • I just believe in the power of the people Mike. The case was made for altnets during the last assembly, Neelie took it on board, and I think help is on its way. The telco lobby is very strong and its taking a while to convince the politicians that copper is on its last legs. We are getting there. Keep the faith.

      Chris Conder

      2012/07/13 at 07:18

      • Unfortunately, Chris,in my opinion the “power of the people” is an idealogical myth. Unless you are planning to go on the streets with pitchforks (let me know where and when….) the ‘power’ lies with the politicians.

        We face two opposing requirements here: We need to spend loads of money in the EU getting a future-proof broadband system in place v the EU piggy banks are empty.

        In terms of the UK, I firmly believe that JH’s parting shot (NB scuttlebutt rumour only) should be to DIRECT BT to open all assets at a reasonable price, with NO restrictions, and let BT then go to the EU to protest, where I feel the reception might be less than warm.

        We need to look at the ‘resources’ allocated here in the UK and make the best of them. Supporting dead-end technology, I think we all agree is not that. I have for a long time argued that the money should be spent on the fibre network (remember the ‘forgotten’ digital pumps – who said that?). My ‘fag packet’ calculations here in West Sussex tell me that with the BDUK £6.26mill and the County £6.26mill we could lay over 1000km of NEW fibre – ignoring the existing BT etc networks. I remain convinced that if this were done, ISPs and Telcos would see the economic value in stimulating demand and connecting the ‘last bits’ at much reduced cost to them than at present. Now ‘open’ the existing networks to the same folk and see what would happen.

        I’m oiling my pitchfork tines.

        Mike Phillips

        2012/07/13 at 07:58

      • What do you mean by ‘copper is on its last legs’ and how is that relevant?


        2012/07/13 at 22:25

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