Financial position of many European competitive fixed telcos unsustainable  

Brussels, 21 May 2012, 

CEOs of leading challenger telecom operators today called upon the European Commission to take urgent action to cut wholesale charges and end discriminatory conduct by dominant firms as figures show that the business case for most of Europe’s fixed competitors is not sustainable.

Despite leading efforts to install fibre infrastructure to deliver high speed broadband , most competitors have struggled to make a return and have put future investment plans on hold as high charges levied to rent incumbents’ legacy copper infrastructure drain their reserves. In many countries incumbents are making 100% of available cashflows in fixed telecoms more than 10 years after markets were liberalised. Consolidation in some markets has resulted in all or nearly all alternative operators exiting the fixed market.

Incumbents have argued that regulated charges for access to their historic copper networks should remain the same or even increase to fund their investments in higher speed fibre lines. However, in a meeting with Vice-President Kroes at the ECTA event on super-fast broadband, challenger CEOs will highlight that the majority of incumbents are not installing fibre all the way to households, but are instead making partial network upgrade (vDSL), which cost relatively little and have the potential to undermine competition by limiting entrants’ ability to unbundle the access network of the dominant firm. Recent data suggests that many incumbents installing vDSL have been able to retain nearly 100% market share of these lines, a position which would strengthen their dominant position even further in years to come . 

Tom Ruhan, chairman of ECTA said “It is time for a wake-up call. The liberalisation experiment which Europe began in the late 1990s is close to failing because regulatory rules are not supporting the business case for even leading telecoms competitors. If current trends continue, we may be back to monopolies and duopolies for broadband services in 5 years time. This will not deliver more investment in broadband and will have a negative impact on the services and prices consumers receive.” 

The European Commission is in the process of developing Recommendations on rules governing wholesale charges and regulatory conditions on “non-discrimination” in the telecoms sector. Incumbents have challenged proposals that would compel them to invest in exchange for retaining higher charges on their legacy copper infrastructure. CEOs of alternative operators, which currently operate most of Europe’s fibre infrastructure, argue that incumbents have been receiving subsidies for years which have drained competitors of capital and yet have failed to invest in modernising their networks. 

“It is time the copper gravy train ended,” said Tom Ruhan. “Incumbents which have not invested should be held to account, and the whole system needs to be revised to make sure that all efficient telecoms operators can make a fair return on their investments, not just dominant firms.”

Background

*  With the Digital Agenda Broadband targets the Commission committed to achieve: 

- Basic broadband for all by 2013: basic broadband coverage for 100% of EU citizens. (Baseline: Total DSL coverage (as % of the total EU population) was at 93% in December 2008.)

- Fast broadband by 2020: broadband coverage at 30 Mbps or more for 100% of EU citizens. (Baseline: 23% of broadband subscriptions were with at least 10 Mbps in January 2010.)

- Ultra-fast broadband by 2020: 50% of European households should have subscriptions above 100Mbps. (No baseline)

ECTA (the European Competitive Telecommunications Association www.ectaportal.com ) is the pan-European pro-competitive trade association that represents more than 100 of the leading challenger telecoms operators across Europe. For over a decade, ECTA has been supporting the regulatory and commercial interests of telecoms operators, ISPs & equipment manufacturers in pursuit of a fair regulatory environment that allows all electronic communications providers to compete on level terms. Our members have been the leading innovators in Internet services, broadband, business communications, entertainment and mobile. Contact: Federico Poggi, Senior Manager Public Affairs (+32 2 290.01.03 / fpoggi@ectaportal.com ).

1 This press release represents the views of alternative operators, and cannot be held to reflect the views of ECTA members with incumbent interests

2 55% of fibre-to-the-home lines were installed by alternative operators as of 2011 – FTTH Council/IDATE

3 vDSL share data WIK NGA progress report March 2012 table 3 page 43.

 http://ectaportal.com/en/upload/File/Press_Releases/2012/NGA_Progress_Report_final.pdf 

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