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Steelie Neelie stares down telcos over fibre sharing

Euro digital queen will make them ditch copper

The smart choice: opportunity from uncertainty

Opinion Telco operators have a wonderful habit of neither listening nor being rational when local loop unbundling is ever mentioned. The reactions, spread across the European press, to the two consultations announced by Neelie Kroes, European Commission Vice President for the Digital Agenda, mostly accuse her of being mad and her ideas unworkable.

But if anyone actually goes to the European Commission website and looks them up, they will see that these ideas are quite straightforward. The essence is that European incumbents, and in particular those which used to be telco monopolies, will not get a break from opening their networks to rivals just because they install fibre, as she has laid out details of how regulators should go about the transition from copper to fibre.

We burst out laughing when she pointedly addressed the issue of how new fibre services should be made available, especially when it meant tearing up copper, or switching over copper backhaul to support fibre. She described a scenario where incumbents would deliberately fail to complete negotiations for sharing fibre, and then blithely cut off the customers of wholesale or unbundling partners who are on copper by supporting only fibre in the area. The fact that Kroes feels she has to address this so precisely implies that telcos really thought that was going to be a fair way to compete.

No sole rights for entrenched telcos

It also says that the entrenched telcos still feel like they have a right to have sole access to customer homes, approach ducts and exchanges, ahead of the new generation of rival suppliers who are making broadband so competitive in the modern era.

The other issue that Kroes has addressed is merely the reiteration of just how existing copper access should be shared. She is worried that many EU regulators have not approached it accurately and that it is still difficult in some parts of the EU to provide unbundled ISP lines.

Now we know that US readers will be appalled at unbundling, since it was killed by US courts for their incumbents – and this is seen as right and proper by all right-thinking Americans – but it has worked in Europe and is working in many parts of the Asia Pacific - in fact anywhere but the US, where not doing it has not worked. These countries have better, more widespread broadband than the US – and more fibre direct to homes. Interestingly in the US there was also a moratorium on piggybacking on fibre, where it goes within 500 feet of a home, and that's what triggered, back in 2004, the fairly aggressive US fibre expansions in the biggest case of corporate blackmail we have ever witnessed.

Europe need not follow US model

Now incumbents here are talking openly of the EU approach being crazy, suggesting that it means that any fibre that it invests in will benefit rivals, and will immediately be under price pressure. At the same time it has been suggested that where existing unbundling principles are said to adhered to in Europe, it's really just boiled down to a cut in copper attachment prices - however, this is not the case in the established unbundled economies, such as France and the UK.

This involves taking a detailed look at the costs of the copper in the ground, the cost of maintaining that copper, the cost of adding new backhaul and new access lines, and adding a premium so the telco can make a margin.

In the US the incumbents convinced a court that the FCC could not do this, by proving as far as the court was concerned that the price the FCC had tried to impose was below cost. It's unlikely that it was. Net result is that the US has a monopolistic fixed line network, and European telcos are jealous of the privileges of Verizon and AT&T.

The bleating seems to say: "Either give us freedom from connection (like the US) for our fibre, so we can make back our investment or let us continue to charge excessive amounts for copper broadband, to fund the laying of fibre."

Either way consumers will continue to pay high prices for broadband (though nothing like as high as the US). What's laughable is that the telcos who are making money hand over fist on slow copper broadband are still saying that even with all that profit, they don't have enough money to invest in fibre.

Over the past few months Vivendi, Deutsche Telekom, and Alcatel have pushed a strategy for accelerating faster deployment of high-speed networks but this included "investment incentives" like the US, where there would be a limit to some regulation. They had thought they were about to get their way, so the arrival of yet another consultation process which seems to point to an identical regime for fibre as was put in place for copper, was something of a surprise.

The statement from the EU said that the consultations are part of commission efforts to boost the single market for telecoms services by ensuring consistent and coherent approaches to regulating telephone and broadband networks in all member states.

The first consultation is about non-discriminatory access for alternative operators and the second is about the way national regulators calculate prices operators have to pay for wholesale access. The results will help the Commission draft recommendations which it can later enforce through local regulators.

Copyright © 2011, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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