In reaction to Vice-President Kroes’ announcement at the FT/ETNO conference this morning 3 October, Ilsa Godlovitch from ECTA said:

ECTA welcomes Vice-President Kroes’ launch of the public consultation on costing methodologies. It is very encouraging that the European Commission recognises that there is a need to reassess how access prices are calculated. Today network owners in many countries are making excessive profits over their largely depreciated copper infrastructure. This means that consumers are paying very high prices and investments on fibre networks are just not happening.

ECTA is, however, concerned at the suggestion that fibre wholesale charges could be permitted to rise further. History shows us that allowing excessive profit has not brought investments in networks all that investors need is a fair return, not excessive profits. The risk with allowing overly generous returns is that fibre prices could be pushed out of consumers reach. Excessive prices for fibre would also undermine the digital agenda targets. 

ECTA believes that that the reasons for Europe’s slow progress on broadband are two-fold:

Firstly, perverse pricing rules in many countries encourage incumbents to sweat existing copper assets rather than investing in modern fibre lines which could deliver much faster speeds. This is because often incumbents have been allowed to charge customers for the cost of building a brand new copper network today (current costs) rather than the actual (historic) costs  they incurred when they built the networks decades ago. A study published in April 2011 by WIK Consult suggests that charges based on “current” costs could be as much as double the real costs of copper lines (see WIK press release), inflating retail prices and allowing incumbents to reap excess returns without any requirement to invest these funds in upgrading their networks.

Secondly, if and when fibre networks are built by incumbents they have typically been built in a closed way, excluding competition. This has resulted in high prices and poor services. It is no surprise in this context that consumers have shunned next generation telecoms. A change to properly regulated open business models could significantly boost take-up by enabling different operators to offer new services and high speed broadband at affordable prices. 

We believe that the Commission holds a number of important tools in its hands to take Europe in the right direction for its digital future. In particular, planned Recommendations on wholesale telecoms pricing and on “non-discrimination” (ensuring that dominant vertically integrated firms do not favour their own business at the expense of their competitors) will be crucial in changing the incentives for investing in fibre and in delivering truly open networks. We expect consultations on these Recommendations to be issued on or soon after Monday 3 October.

We also welcome the Commission’s proposal to make €9bln available to support infrastructure investment including telecoms networks through the “Connecting Europe Facility”. This facility provides another important tool which will enable the Commission to channel funds towards business models which are open and future-proof for the benefit of all Europe’s citizens and businesses. This proposed financing initiative is currently being considered by the Council of Ministers and European Parliament.

Quote from ECTA Chairman Tom Ruhan:

“What Europe needs to help kick-start growth is a truly open high speed Internet infrastructure that will transform our consumption of digital goods and boost productivity in our struggling economy. But right now, we are in danger of missing the boat. Achieving Europe’s broadband targets will require clear action from policy makers to address perverse pricing rules that reward dominant firms for maintaining their old networks rather than investing, and to foster open business models that will unleash a multitude of innovative and competitive services.”

Federico Poggi

Manager, Public Affairs

ECTA - European Competitive Telecommunications Association

Rue de Trèves 49,

1000 Brussels

Belgium

E-mail: fpoggi@ectaportal.com

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www.ectaportal.com

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