EU Wants to Slice Copper-Based Wholesale Rates

European Union telecoms commissioner Neelie Kroes wants to create a new pricing model for wholesale access to incumbent telecom provider networks that would cut prices for copper access but exempt carriers from the rules if they sell fiber optic access to wholesale customers. The new rules would create incentives for replacement of copper infrastructure. Kroes calls for greater broadband investment

Private investors have been reluctant to invest the €270 billionn Kroes estimates is needed for Europe to replace its copper access network with an optical fiber network. Broadband investment is the issue

It’s a contentious issue, as you might guess, as service  providers remain unconvinced there is adquate end user demand for new services that would justify the investment, at least for the moment. And that has investors concerned as well.

Cut Prices or Else: EU to Carriers

EU telecomumunications Commissioner Viviane Reding has given the mobile phone industry until July 1 to cut the price charged to people for sending text messages or surfing the Web on their laptops while outside their home nation in the EU region.

Hoping to head off mandatory pricing and regulation Vodafone, Deutsche Telekom and KPN also have announced cuts in their data roaming prices.

As many in the computing and Web worlds are starting to discover, governments and regulators have much to say about which services and companies can succeed in the communications business, and even affect the amount of profits any contestant can make.

Any mandatory EU intervention to cut the price of sending text messages or using the Internet while traveling outside one's home country would be limited to the wholesale level. In other words, the EU would regulate the prices carriers can charge other carriers for roaming access, but leave service providers free to set their own retail prices.

More Price Regulation Coming?

Though European Union regulators are putting strong pressure on Europe's service providers to dramatically lower data and voice roaming costs, that isn't likely to happen anytime soon in Asian markets, says Rosemary Sinclair, International Telecommunications Users Group external relations officer, and reported by CommsDay.

“The significance to me of what has happened in the EU is that it indicates to us that the cost structure of delivering these calls is much, much lower than the retail prices,” Sinclair says. “The operators know exactly what the costs of services are,
but they are not prepared, without regulatory oversight, encouragement,
or if necessary, intervention, to do something about it."

"At the moment, as far as I can see, the only thing that would fix this is regulatory action," she says.

Service providers take notice: a re-regulatory wind is blowing around the world, though it isn't as windy everywhere. Telstra seems to be in a different situation than EU carriers. U.S. carriers have enjoyed a decade of less intense regulation. But there's one thing you can be sure of: it the telecom business, no set of rules, and no climate, lasts forever. The next swing will be back the other way.

Major Reform of EU Telecom?

In a major revamp of its rules on wholesale access to optical loops, the European Commission executive branch has decided that, where competition is weak, incumbents must create separate “wholesale access” companies that sell services to all service providers.

Known as “structural separation,” the model resembles that current in the U.K. market, where BT and all other wireline providers buy access services from a wholesale OpenReach company.

The plan still must be ratified by member nations, and opposition is expected. National regulators are happy to be given more powers, but do not want the EU executive to be allowed to overrule their decisions and insist that they do not need an EU watchdog.

The European Commission says the new rules could be applied by the end of 2009, but observers expect EU states such as Germany, France and Spain to water them down.

If ratified, however, the decision essentially means competitors will have wholesale access to incumbent fiber-to-home facilities. The decision stands in stark contrast to rules in the U.S. market, where cable and telco providers are not required to lease such facilities to competitors.