Telecoms operators’ profits on their ageing copper networks in Europe may be stifled to spur investment in high-speed broadband under plans put forward by EU telecoms commissioner Neelie Kroes.
Ms Kroes said she was “very interested to explore a new pricing model …creating the conditions for the replacement of the old copper network with fibre”.
Her plan would impose extra regulations on the owners of copper networks, such as France Telecom and Spain’s Telefónica, by lowering the price at which they are forced to grant network access to smaller rivals in so-called unbundling deals.
Incumbent operators could be exempt from the lower charges if they opt to invest in fibre networks to replace copper ones.
Private investors have been reluctant to invest the €270bn Ms Kroes estimates is needed for Europe to match internet speeds in parts of the US and Asia. In an interview with the Financial Times, the former EU competition enforcer said she saw “some truth” to arguments that large incumbents were delaying investing in internet lines for fear of cannibalising their business. She acknowledged that artificially reducing the price of copper lines would make broadband packages cheaper – potentially making it more difficult to convince consumers to upgrade to fibre.
“I have the impression that in the current situation, it would be difficult to build fibre networks competing with cheap parallel copper networks,” she said.
Any reduction in the highly regulated copper networks would be a boon to smaller telecoms companies that pay access fees to network owners. Conversely, it will hurt the telecoms groups that own the infrastructure, who often command large market shares.
“Copper is still incredibly important to the incumbent telecoms operators, it’s the bulk of their business,” says Nick Delfas, analyst at Morgan Stanley.
The new copper pricing structure, which will have to weather heavy lobbying from Europe’s telecoms groups, would be paired with €9.1bn in EU funding to stimulate investment in fibre broadband, Ms Kroes said.
The money will be made available from 2014 primarily to support less attractive broadband projects such as those serving rural areas. It will be open to groups beyond traditional telecoms operators, including utilities like water or electricity, and public authorities.
But the subsidy sweetener is unlikely to assuage large telecoms groups. In an industry conference in Brussels on Monday, they will seek to convince Ms Kroes that rules on opening access to competitors need to be eased, rather than tightened.
“If the EU wants to meet its ambitious broadband targets, the Commission will have to give confidence to investors by giving a strong political signal as soon as possible,” said Luigi Gambardella, head of the European Telecommunications Network Operators association, an umbrella group of large telecoms companies. “Wholesale regulation should provide companies with reasonable return prospects on current [copper] and next generation broadband networks.”