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Vice-President Kroes turns her back to competition


13 Jul 2012



Today, the Vice-President of the European Commission responsible for the Digital Agenda Neelie Kroes has announced her willingness to allow regulatory holidays for Next Generation Networks and to continue costly access conditions for legacy networks. The package of measures fortunately will also strengthen the non-discrimination obligations in electronic communications.

ECTA, the pan-European industry association representing over 100 pro-competitive telecoms operators welcomes the steps Mrs Kroes has announced to counter some of the abusive behaviours that incumbent operators put in place to resist competition. However, the direction that Mrs Kroes said to be willing to take on pricing of copper-based legacy networks and on fibre-based Next Generation Networks will harm the competitive conditions of the broadband markets and will eventually harm consumer interests without fostering investments.  

ECTA’s chairman Tom Ruhan said “we welcome and strongly support the approach to non-discrimination taken by Neelie Kroes. Abusive and discriminatory conducts of incumbent operators have a direct impact on consumers’ services and wallets. But we deeply regret the approach that Mrs Kroes is suggesting on price methodologies. As a result of this approach incumbents will not only be allowed to regain full monopolies on future networks, they will also be allowed to continue overcharging consumers and starving competitors on existing networks. This is a departure from the approach taken with the NGA Recommendation in 2010 and might take Europe back to the pre-liberalization era. The EU already lags behind other regions of the world when it comes to super fast broadband – an important enabler of economic growth – and these measures will set us further back”.

The European Commission has in the past recognized that consumer prices suffer a direct impact from abusive behaviours of incumbents in wholesale markets (this digital deficit has been estimated to be worth €25bn)[i]. Hard-core pricing abuses and discriminatory behaviours of incumbent operators have been punished recently by the Commission. However, this happened years after the abusive conduct started. The non-recoverable harm to the market and to competitiveness makes strong ex-ante intervention necessary. ECTA thus warmly welcome the announced “margin-squeeze” test and the move towards Equivalence of Inputs. It will be up to National Telecom Regulators to make real progress in diligently and strictly implementing non-discrimination obligations.

However, the approach announced by the Neelie Kroes on asset pricing policy is catastrophic for competitors, for consumers and for the competitiveness of our economy. Mrs Kroes is asking for more of the same when it comes to pricing, but fibre technology and regulatory holidays have been there for years and investments have not taken place by the dominant firms who keep asking for more money. Incumbents have been only partially upgrading their networks (VDSL) and re-building their monopolies on future broadband (the incumbent retail broadband market share of VDSL lines in the EU is close to 100%)[ii]. There is no reason to believe that without competitive pressure, incumbents will give up their goldmine legacy network to invest in Europe. Investments will take place in more attractive emerging economies and short-term yield-hungry banking investors will continue to be rewarded with more than a half of incumbents’ cash-flow.[iii]

Alternative operators who are currently the major investors in future proof fibre networks to the home (FTTH)[iv] will be forced to keep transferring the near-totality of their cashflows to incumbents and be prevented to play a significant role in investments. Many, alternative operator will be simply forced out of the market.        

In summary the measures planned on non-discrimination will remedy some of the currently occurring abuse but in itself are not enough to ensure a competitive market and affordable broadband prices. The proposal on pricing is a U turn on the pro-competitive approach previously taken by Mrs Kroes and risks setting Europe back to ‘last in class’ in high speed broadband by undermining competition without incentivizing more investment.

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ECTA (the European Competitive Telecommunications Association - ) 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 / ).

Federico Poggi

Senior Manager, Public Affairs

ECTA - European Competitive Telecommunications Association

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