European Union proposals to spur gigabit home broadband have gotten some opposition from non-dominant connectivity service providers, in large part because of feared changes in wholesale access rules viewed as boosting legacy provider revenues and raising those of new market entrants.
That outcome is expected if the rules on mandatory wholesale pricing are removed or modified.
To be sure, the proposed new rules would also focus on streamlining construction and permitting requirements, such as requiring publicly-owned physical infrastructure including ducts, poles and sewers to make access to those facilities available to service providers.
When the Commission talks about the need to “incentivize network investments,” competitors are wary of new rules allowing wholesale rates to float free of mandatory prices. When the Commission talks about the need to create“ economies of scale for operators” and a better climate for cross-border investment, that signals an intent to reduce facilities deployment cost that will help facilities providers the most.
But it is the change in wholesale access pricing that will affect non-facilities-based competitors the most.
In the U.S. market, for example, deregulation of the local access business entailed instituting generous wholesale discounts that incumbents were obligated to provide wholesale customers who wished to use their facilities. That created an immediate rush of service providers into the market able to buy end-to-end wholesale access at about a 30 percent discount, speeding market access but also eliminating the need to build facilities.
When regulators decided to overturn those rules, and allow market-based pricing, the wholesale-based competitive industry promptly began to recede. Wholesale access still happens, but at market-based rates and generally for backhaul, trunking or service to support services for business customers.
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