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European regulatory decision pleases incumbents

23 July 2012
 
The debate over whether operators should be forced to lower the prices they charge other operators for access to their copper telephone networks appears to have been settled. Incumbents had argued that reducing copper prices would simply limit the amount of cash available for investment in new networks, and it appears that the European Commission agrees.
 
The decision was part of a package of proposals for European telecoms regulation that will apply until at least 2020. The proposals aim to encourage private investment in telecoms infrastructure as the region makes the expensive transition from copper-based ADSL broadband to high-speed fiber access networks.
“In the polarised debate on this issue, no one policy response can give 100% satisfaction to all the competing interests,” said Neelie Kroes, vice president of European Commission responsible for the Digital Agenda. “But today I am presenting the outlines of a package that will provide the one thing that everyone wants: durable regulatory guidance – to last until at least 2020.”

The proposals have three key elements:
 
1) Tougher non-discrimination rules to ensure that incumbents do not get an unfair advantage. Mechanisms must ensure that competing operators get the same inputs, on equal terms and of equal quality, as the incumbent's own retail operations. This should enable alternative operators to compete on quality and service in addition to price.

2) Stable copper prices: There will be no price cuts on average to what incumbent network operators can charge to competitors buying wholesale access to their copper networks. The Commission found no evidence that lowering copper prices will induce greater investment in very fast broadband. On the contrary, the Commission found that fiber investment is progressing relatively well in some Member States where copper prices are at or above the EU average. Regulatory authorities were also concerned that an approach linking the copper price to NGA investment commitments would be difficult to enforce in practice, and could be abused.

3) More flexibility for "next generation" wholesale products: National regulators will no longer be required to apply cost-oriented price regulation in almost all circumstances. Flexibility depends, however, on application of the non-discrimination rules to ensure genuine equal treatment of competitors, and on the existence of a competitive counterweight from copper-based services or other infrastructures like cable and 4th-generation wireless.

These decisions will be put into legal form through formal Recommendations to be made before the end of this year, says Commissioner Kroes.

By Pauline Rigby