Small telcos call for end to 'copper gravy train'

Europe's smaller telecoms firms have warned of a return to the age of telco monopolies, claiming that larger companies are still charging them too much in wholesale fees for their legacy copper networks.

The companies, which are members of the European Competitive Telecommunications Association (ECTA), told digital agenda commissioner Neelie Kroes on Monday that their business case for fibre deployment was not sustainable. They said this was due to both high wholesale charges and the fact that telcos across Europe have roundly ignored the European Commission's plea to open up fibre network access.

"It is time for a wake-up call," ECTA chairman Tom Ruhan said in a statement. "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 five years' time. This will not deliver more investment in broadband and will have a negative impact on the services and prices consumers receive," Ruhan warned, adding that "it is time the copper gravy train ended".

ECTA public affairs chief Federico Poggi told ZDNet UK on Monday that, in many European countries, large incumbents were making almost all the "available cashflows" in fixed telecoms. Indeed, he pointed out, in Italy and Portugal incumbents are making 100 percent of this money, causing smaller operators to go out of business.

"In Italy, when liberalisation came into force there were 70 operators. There are now less than 10," he said.

Poggi said the UK and France were the two countries that stood out for actually letting smaller operators make money.

Unbundling

ECTA has made its argument about copper pricing before. Essentially, its position is that the incumbents got public funding to roll out the copper networks before they were privatised, and they should now drastically drop their wholesale charges for the depreciating networks.

If current trends continue, we may be back to monopolies and duopolies for broadband services in five years' time.

– Tom Ruhan, ECTA

Conversely, the incumbents have argued that, if they charge too little for access to their copper networks, the resulting low retail prices for access will deter consumers from paying lots more for faster fibre access. The incumbents also say they need high levels of income from the legacy networks to pay for the deployment of the new ones.

However, Poggi said ECTA's latest plea for Kroes's sympathies comes with a new study, commissioned from analysts at WIK Consult, which demonstrated how bad the situation was getting.

When liberalisation took place, a key step was to force incumbents to let smaller rivals install their own kit in the incumbents' phone exchanges, a process called local loop unbundling (LLU). The idea was to increase competition, and in the UK this led to the separation of BT's Openreach division.

The Commission said a few years ago that incumbents would also have to allow competitors onto their fibre networks. In the case of BT, the Commission agreed in 2010 to allow a short period of 'virtual unbundling', which would enable some competition but not force BT to allow rivals' equipment into their fibre network.

Ofcom has shown no sign of planning a shift to actual unbundling for fibre in the UK — a stance that may lead to a clash with Kroes's department in the coming years.

According to Poggi, the halfway measure that is fibre-to-the-cabinet (FTTC) makes the situation even worse for smaller telcos, as "it is impossible to access the local subloop".

As most of the incumbents' fibre strategies in Europe are largely based on FTTC rather than taking fibre all the way to the customer's premises, ECTA says the effect is to shut out competition.

"Competitors are not able to install their own equipment on the line," Poggi said, adding that the Commission's recommendation for unbundling fibre access "was completely ignored by the member states".

Investment

Meanwhile, Kroes told ECTA at the Monday meeting that the Commission was creating a market "where you have the incentives to invest and innovate".

"Some say that for investment to happen, we need to abandon competition, that we need to choose between one or the other," Kroes said. "My answer is simple: no way! Competition and investment aren't exclusive — the one promotes the other. Because in a competitive market, you have to invest for the future if you want to stay in the game."