Google Extends Olive Branch to French Publishers

Google has offered French publishers about 50 million euros for the right to index their content. The problem Google (and other search engines) face is that French government is threatening to pass new laws requiring such payments.

That news comes as Google reportedly also is paying Orange to "terminate" or deliver its content to Orange end users. That deal, in all likelihood, is not what it seems to be. Google operates one of the largest IP networks in the world, so that specific deal probably is not a payment to Orange to deliver traffic, but only a traditional carrier-to-carrier termination agreement. 

The deal Google offered to the publishers includes the purchase of advertising space from Google, on paper and digital media, a commercial collaboration between publishers and search engine and the use by the publishers of Google's advertising platform AdSense.

Media owners rejected the offer, saying they wanted annual income of about 70 to 100 million euros.

The pressure from French publishers shows a possible crack in the traditional business relationship between some large application providers and some large media and telecom interests. Both of those industries want more of a share of Internet ecosystem revenue, and such fees as Google supposedly is paying are one way of achieving those objectives. 

Policy issues aside, the French media issue is significant, as Google now increasingly is faced with a choice: create new business and commercial deals with business partners, even when it would, in principle, rather not do so, or have regulators and legislators potentially force it to do so anyway, on terms Google will have no control over, or ability to influence. 

NTT Docomo Chases "Smart ARPU"

No matter how much the term of art is criticized, "dumb pipe" is never far from the surface in the mobile or fixed network business. NTT Docomo, in fact, now uses the term "smart ARPU (average revenue per user)" to describe some of its new value-added services.

The very term implies that there is "dumb ARPU," namely vanilla mobile broadband, offering best effort only access. Nor is there complete agreement on the issue of whether differentiated end user quality of service is a potential source of such smart ARPU.

In fact, said Minoru Etoh, NTT Docomo managing director, offering best effort only access is operationally much simpler than offering tiers of service based on quality metrics. Many others of course believe it will be important to offer differentiated service, where it is possible.

Still, the problem with all the new services mobile operators are experimenting with is that there is still not so much agreement about what will be wind up being a “big” revenue stream, and what might not. Nor is there complete agreement on where the biggest opportunities might lie.

That uncertainty was much in view at a session on the mobile business at the Pacific Telecommunications Council where Yijing Brentano, Sprint VP, expressed optimism about prospects for mobile advertising, as did David Schropfer, The Luciano Group partner.

On the other hand, Minoru Etoh, managing director with NTT Docomo, and a venture capitalist in the audience, disagreed. “I’ve seen hundreds of business plans based on advertising,” the VC said. But Schropfer argued that the type of advertising makes a difference. Traditional formats can change with mobile.

“You can change behavior if you offer a coupon to me while I am in the store,” Schropfer said.

There was less disagreement with the notion that machine-to-machine services would be a significant opportunity, but even there the magnitude of the opportunity is uncertain.

M2M will be important, but only as a business customer service, with mobile service providers selling to automobile manufacturers, said Etoh and Brentano. And Schropfer even classified much of mobile commerce as an M2M opportunity. “M2M is the crux of where mobile commerce is going,” said Schropfer.

But Etoh was not convinced about the timing, and was uncertain revenue or adoption would be significant, any time soon.

Etoh said Docomo now refers to new value added services including music and video on demand as “smart ARPU (average revenue per user),” which now accounts for about 10 percent of NTT Docomo revenue.

There was much more agreement that new revenue sources are essential, though. in large part because there already is only so much revenue service providers can earn from end users buying mobile broadband, said Etoh.

Etoh also warned that Wi-Fi offload might not provide as much benefit for capacity relief in dense urban areas as many now expect.

Despite the rage for mobile offload using Wi-Fi, Docomo has found that Wi-Fi offload doesn’t work in very dense areas, with smallish macrocells, because there is too much interference between the Wi-Fi sites.

Phablets Could be Big for Developing Markets

The controversy about phablets (some think it is a momentary fad , others think it is something more, and will grow) could have some implications for broadband usage in many parts of the developing world, irrespective of what it could mean for consumers who want a smart phone with a bigger screen.

And that implication is that users who already have demonstrated huge appetite for mobile phones, and will soon want to use the Internet on a more convenient screen, might gravitate to phablet devices as a sort of “best of both worlds” approach to devices.

We’ll have to wait and see, but the emergence first of smart phones and now tablets has begun to make concrete the notion that in many markets, the most-popular computer people use will be a mobile device of some type. 

What Comes After the PSTN?

Some would say it is misleading to talk of the “end of the public switched telephone network,” as that implies something more than a technology replacement (IP for TDM) as the industry earlier evolved from copper to optical fiber, or analog to digital switching, will happen.

In a real sense, the decommissioning of the PSTN, though a big event, is something veterans of the mobile industry are well acquainted with. That, in fact, is the meaning of the current transition to “fourth generation” networks.

The first generation U.S. analog network was shut down in 2008, for example. The second generation TDM network will be shut down in 2017, according to AT&T.

Verizon will shut down its 2G and 3G networks in 2021.

Still, there is a reasonable sense that something more than mere generations of outside plant, switching technology or protocols are at play for the fixed network. In part that might be because it hasn’t happened before, as it has in the mobile business.

The other obvious difference is that the mobile ecosystem, which requires tighter integration of networks, devices and apps, arguably will have more protection from “dumb pipe” scenarios that worry fixed network executives.

An open-ended question rhetorically asked by TeleGeography VP Stephan Beckert at the Pacific Telecommunications Council illustrates thinking about “the end of the PSTN.”

“Does anyone have a post-PSTN business model?” he asked. The question came in the context of a presentation about the international voice market. Mobile executives would not understand the question, since it is akin to asking “does anyone have a post-analog business model?”

Granted, the post-analog mobile business model did not have to contend with the existence of the Internet. And though mobile service providers are starting to deal with over the top alternatives to carrier services, they have not faced nearly the pressures on the fixed network business.

But the transition to IP, and the diminution of voice as the key revenue driver, probably already has an “answer.” The answer obviously is broadband. One way or the other, fixed network service providers will base their revenue models on broadband access and as many valuable carrier applications and partner relationships using that network, as is possible.

Entertainment video is the second most important application, beyond high speed access. Beyond that, much remains to be seen. But in a simple sense, the post-PSTN business model already can be seen: broadband is the foundation service.

On the other hand, the precise timing of voice as a sizable revenue stream is hard to predict. Service providers have any number of retail packaging techniques that could extend the carrier voice revenue opportunity for some time, even if usage begins to dwindle significantly.

Think of the way voice not is bundled with broadband and video entertainment to encourage people to keep voice service in order to get discounts on all three services. That doesn’t necessarily mean people use the voice service much, but they pay for it.

But even a self-proclaimed optimist such as Becket notes that although “voice is not dead yet,” the end is coming, for voice as a major revenue source.

Executives already know the answer, it is fair to say. The answer begins with broadband access, but only begins there. Much more will have to follow, and the outcome is uncertain at the moment. But it builds on broadband.

Mega hits One Million Users in a Day

Mega, the new file sharing service from Kim Dotcom, has passed one million users, gained in a single day, Dotcom says. The launch, not a "re-launch" of Megaupload, still is about "content distribution," a business focus that got Megaupload into trouble over content piracy.

Dotcom says that will not be an issue for Upload. Content owners are certain not to be reassured. The service offers users 50 Gbytes of free content storage, and operates in that sense in a manner similar to Dropbox or Skydrive.

The new twist is that Upload is described as a privacy play. Since all data is encrypted, the service can claim that it has no idea what users are uploading and storing, or sharing. The user terms of service specifically forbid upload of copyrighted material, but, by design, Upload won't know what content is uploaded.

It's just another example of friction between IP-based technology and legal frameworks, between what can be done and what is supposed to be done. Even the privacy angle has a dual character. The site protects user data, which many will say is a good thing, for obvious reasons. But that same privacy also cloaks criminal and other anti-social activities.

Is Usage-Based Internet Access Inherently Unfair?

Though understandable, given the “no incremental cost” nature of much Internet content, information and applications, one might argue the way many think about the Internet is out of sync with the way they think about most other products they buy and use. 

Most of the criticism about usage-based pricing is that it somehow is "unfair." Much of the criticism takes the form of complaints about ISPs somehow taking advantage of consumers. It is argued there is no need for metering, for example.

In other cases, some critics imply or allege that metered pricing is simply a way for ISPs to make more money from their customers.

Are usage-based charging mechanisms inherently unfair and detrimental to continued development of the Internet? Some think so. And there is Internet precedent for such thinking, to be sure. AOL found usage exploded when it, and other dial-up access providers, shifted from metered usage to flat fee pricing.

One might object that this encouraged use of the Internet but at the “expense” of increased direct costs for Internet access providers. So there is good reason to argue that directly metered use of Internet access might actually discourage people from using the Internet.

But that isn’t generally the way usage is rated, these days. Consumers generally understand and seem comfortable with “buckets of usage” that provide cost predictability, but also allow users to buy less or more access in line with their needs.
‘
Usage based pricing might actually be a good thing for the overwhelming number of consumers, to the extent that lighter users pay less, heavier users pay more, and suppliers have accurate information about how much more capacity to add, where and when, which in turn ensures that investment is adequate to support anticipated growth of demand.

In fact, one might argue, the worse scenario is where usage and pricing are not related in some relatively direct way, as that distorts both demand and supply.

One frequently hears warnings about outsized growth of broadband access demand, the implication being that a crisis might develop if “something is not done.” Some predict that 1,000 times more mobile bandwidth will be needed by 2020, for example.

But both suppliers and consumers are rational about their bandwidth choices, when there is a clear link between consumption and out of pocket costs, and when consumers can act on that information.

Even if future supply were not an issue, it would still make sense to allow consumers to make choices about how much “Internet access” they really want to purchase, as that would send clear signals to suppliers about how much to invest in new capacity..

The problem with “unlimited” plans is that such retail pricing does not automatically send accurate supply and demand signals, and does not trigger the normal decision-making consumers always make when considering how much of any product to buy.

Nor do we often remember that demand for Internet access is dynamic, not static. Raise the price, and consumers will buy less, lower the price and they will buy more.
‘
To an extent, changes in device profiles also make a difference, as typical bandwidth consumption on a PC is far higher than on a smart phone or a tablet.

And users clearly are shifting Internet activities to smart phones and tablets. At some point, that could slow data consumption growth rates, even if, over time, bandwidth consumption grows.

Demand will grow, but probably less robustly than many forecasts predict. Mobile data consumption, even among smart phone users, is well below 1 Gbyte a month, according to Sandvine.


An analysis by the U.S. Federal Communications Commission suggested that, in the first half of 2009, the median fixed network (half used more, half used less) broadband user consumed almost two gigabytes of data per month. Mobile users consumed only hundreds of megabytes.

The 2009 study suggested that, overall, per-person usage is growing 30 percent to 35 percent per year. That doesn’t necessarily directly suggest how much an “account” or “home” might consumer, though.

The FCC study does not directly correlate a single person’s usage with the account details, as it is a “per-capita” measure. Such “per-person” measures are useful, but not entirely accurate if services are purchased “by location,” instead of “by person.”

n other words, a single user might have one access account, while a family might have three to five people sharing a single account.

As a rough metric, a typical 2.5-person household, sharing one account, might have consumed about six gigabytes a month, based on the 2009 data.

If the 30 percent annual growth rate remained intact through the end of 2012, that might imply 2014 median usage of about seven gigabytes per person, or 17.5 Gbytes per household account, using the 2.5 persons per home assumption.

Other 2010 estimates for current consumption were roughly in the same range as the 2009 FCC figures, adjusted for annual growth.  Comcast said in December 2010 that a typical user consumed about two to four gigabytes a month, far below the 250 gigabyte cap for a Comcast residential account.

That would be right in line with the FCC’s base of two gigabytes, and a growth rate of 30 percent annually.

Actual data consumption for most users of fixed network broadband is not all that high, in other words. True, demand will grow. But so long as price signals can be sent, supply should satisfy demand.

Why "Nobody" Worries About Phone Costs, Anymore

As recently as 2001, it was still possible to say, with a straight face, that “corporate phone bills are a budget buster.” A decade later, can it honestly be said that phone bills are a significant enterprise cost of doing business?

Possibly. Mobile calling now represents two thirds of all business calling minutes in the United Kingdom, for example. So one might argue that it is not voice calling costs, but possibly the cost of mobile subscriptions which are a significant issue for enterprises.

Mobile data charges might be said to be the big current issue, but even there, costs per megabyte have dropped from about 46 cents per megabyte in 2008 to about three cents per megabyte by 2012. That’s an order of magnitude drop in just four to five years.

But at least in developed markets, it is harder than ever to argue that communications costs, for landline voice, mobile voice, fixed network data or mobile data are a “big” cost item for most businesses or individuals. That doesn’t mean there are no problem areas, or that people will not complain.

Overall, as a percentage of total costs of doing business, or as a percent of consumer discretionary spending, mobile or other communications are not a big driver of personal or business spending, on a percentage of total spending.

There are some problem areas, in particular the cost of trans-border mobile calls and trans-border mobile data cost. But high costs always create an incentive for over the top alternatives, spur regulatory action to force lower costs and hence also will eventually become less an issue. In most other cases, communication costs simply are falling.

Whether for consumers or businesses, communication costs tend to be low single digits kinds of operating cost or personal spending categories.

People still gripe, of course. People still complain about the cost of mobile phone service or broadband access. One rarely hears much about the cost of consumer fixed network phone service, in part because the incremental cost, in a triple play bundle, is relatively slight.

Without a doubt, people and organizations will continue to benefit from better features and lower prices. People still will gripe. But communication costs, for the most part, just aren’t a big cost driver for most businesses or a burdensome expense for most consumers in developed economies.

FCC's "Gigabit City Challenge"

Federal Communications Commission Chairman Julius Genachowski has called for at least one gigabit  community in all 50 U.S. states by 2015, and suggests that broadband providers,  state and municipal community leaders figure out a way to make that happen, to create a critical mass of communities.

The FCC also plans to create a new online clearinghouse of best practices "to collect and disseminate information about how to lower the costs and increase the speed of broadband deployment nationwide, including to create gigabit communities."

The Gigabit City Challenge will of course face some obstacles. Some will say local governments, state governments and the FCC itself, which never have had the political appetite or power to compel massive "municipal broadband infrastructure" projects, will face tougher obstacles over the next couple of decades.

If a municipality really wants to build its own infrastructure, on a wide scale, in markets where strong cable and telco operations already exist, mobile service providers and satellite providers, there will be an obvious business model problem, namely that the market probably cannot support a new provider. 

"Overbuilding" generally has proven to be a difficult business proposition, historically. 

One might suppose that someday, one dominant provider in many markets might decide it makes sense to build and operate a wholesale network of this sort. That likely would not be a cable operator, given that industry's historic resistance to such notions.

Telcos have been no more willing, historically to trade away their right to use scarce infrastructure, either. Whether thinking might change some decades hence is hard to predict or foresee. 

The other problem would seem to be that, even if the political will and political power could be amalgamated, it is not so clear that a large municipality, or even a state, could afford the indebtedness required to underwrite a large gigabit network. 

That might have been feasible some decades ago. It certainly will not be a reasonable option over the next couple of decades, and maybe never again. 

Orange Says Google Pays Orange for Carriage

Orange CEO Stephane Richard says Google now pays an unspecified fee to Orange for essentially terminating Google traffic on Orange end points. That might be true, but might not mean much of anything.

The agreement appears to be a voluntary business-to-business agreement between Google and Orange that should be not be properly characterized as a case of Google "paying Orange for access."  

It appears to be more like a standard IP transit arrangement between two networks with unequal traffic volume. 

Separately, European content firms have been arguing for mandatory payment of fees of some sort for use of their content in Google's search results displays.

Both of those issues--new Internet forms of intercarrier compensation and participation in Google's advertising revenues--illustrate the difficulties regulators will face in crafting appropriate regulatory frameworks for IP-delivered content and usage of IP network resources.

Traditional regulatory models do not work so well in an IP context. Application or media providers do not have traditional intercarrier compensation obligations. But there is little question today's new IP network traffic generators--video, media and content apps--impose "use of network" cost issues very similar to traditional intercarrier termination issues.

Nor does the traditional media model work so well. Traditionally, media have used their owned networks to deliver their content. TV broadcasters, radio broadcasters, newspapers and magazines provide the key examples in a classic sense.

Cable networks long ago became a new model, though. To be sure, local TV and radio broadcasters have commercial relationships with their content suppliers. But cable operators have taken the model much further, essentially signing up whole programming networks and then packaging those networks for delivery to cable customers.

There is no intercarrier compensation analogy there, since cable operators own their own networks. The problem with IP content is precisely that the ownership of the networks and ownership of content are separated, by design.

Current regulatory frameworks were not designed for such business arrangements. For media and cable TV style business models, there is a well-understood framework for sharing revenue created by the services, but those arrangements do not require intercarrier compensation mechanisms.

The problem is that all networks are becoming IP networks, which, by design, separate the network access from the content people use on those networks. And there is, by design, no reason for actual bilateral business relationships between the providers of network access and the providers of content.

It's a growing and important issue, and app providers will have to make business decisions the way communications carriers sometimes must: make voluntary business arrangements that solve a problem or wait for regulators and legislators to "do it for them."

The reported deal between Orange and Google is something more akin to a cable TV network carriage agreement than anything else. Some won't like that.

AT&T Warns of Lower Long-Term Rates of Return on Investments

AT&T has lowered its expected long-term rate of return for pension obligations due to the continued uncertainty in the securities markets and the U.S. economy in 2013. AT&T will book at $10 billion charge in the fourth quarter to compensate. 

Verizon is taking a $7 billion charge in the fourth quarter, to cover pension obligations of its own. 

AT&T said the changes will not affect It said the pension loss will not affect its operating results or margins.

Still, the shortfall in pension obligations, which largely reflect assumptions about interest rates, will strike some as unsettling. 

What Makes Messaging Different?

Line, the Asia-based instant messaging app, says it has reached 100 million downloads in 18 months.  That sort of raises the issue of how over the top instant messaging apps are different from text messaging. 

In many cases, instant messaging is a relatively straight forward substitute for text messaging, the value being that users do not incur incremental costs. WhatsApp and Kik might be examples of that use case. 

But Line seems more akin to chat (broadcast messaging), than text messaging (person to person communications). In other ways, Line seems like a gaming portal, and less like a simple substitute for text messaging. 

But Line also is a bit like a social network as well. 

Line also has become an over-the-top voice calling app. The point is that it isn't so easy these days to describe how "instant messaging" is different from "text messaging."

Text messaging and IM are in many ways substitute products. But sometimes even that distinction is inadequate. Messaging seems to be evolving. 

Subscriber Growth Dwindles in U.S. Market: What Will Carriers Do?

There are basically two major ways mobile service providers or fixed network service providers can grow revenues: they can add more units (subscribers) or grow revenue per unit (average revenue per user).

And it is starting to look as though even mobile services, which have been the growth driver for the U.S. telecommunications industry, is facing a new era, when subscriber growth in the internal market can be propped up, near term, mostly by acquiring other firms. In other words, the internal U.S. market is approaching a zero-sum game, where one carrier can gain only by taking share from another supplier.

That is one primary reason why U.S. suppliers are so interested in machine-to-machine services, as that could add unit growth from telemetry services sold to other enterprises, rather than “humans.”

Average revenue per unit is a contest at the moment. Service providers face potential erosion of voice and text messaging revenues, though that has for the most part been a muted trend in the U.S. market, as real as it has become in some other markets, particularly in Europe.

But average revenue per unit is now driven by mobile broadband, which can grow for some time, though not indefinitely. Right now, it is unit growth that is the biggest issue.

Retail net additions (postpay and prepaid net additions) for the  three largest U.S. wireless service providers declined 23 percent on a year-over-year basis during third quarter 2012 to approximately 1.6 million, according to Fitch Ratings.

The decline is largely attributable to a 62 percent  year-over-year drop in prepaid net additions. In other words, not even a consumer shift of demand from postpaid to prepaid now is sufficient to propel revenues for some suppliers who specialize in prepaid services.

Wireless revenue growth will be driven more by usage based data pricing plans and increasing capabilities of smartphones as opposed to expanding the wireless subscriber base, Fitch Ratings says.

The leading U.S. mobile providers added 1.1 million revenue generating units during the thrid quarter of 2012, compared with approximately 3.3 million RGUs during the same period of 2011.

Smart phone penetration has reached 59.3 percent, an important figure because smart phone accounts drive mobile data revenue.

High speed data growth remains flat. Fitch estimates that approximately 542,000 new HSD subscribers were added by all large broadband service providers during third-quarter 2012, 3.1 percent  lower than the same quarter of 2011.

Perhaps surprisingly, video now seems to be driving growth for AT&T and Verizon in the fixed network segment of their businesses.

Fitch researchers also note that the largest incumbent  local-exchange carriers are successfully transforming their consumer businesses into broadband- and video-focused models, largely compensating for saturation or decline of the legacy revenue streams.

“The increasing scale of AT&T’s U-verse and Verizon’s FiOS service platforms is sufficiently
mitigating the ongoing secular and competitive pressures of their respective consumer landline
businesses and has strengthened their relative competitive position,” says Fitch.

AT&T U-verse revenues increased 38.3 percent during  third-quarter 2012 when compared with the same period last year. The revenue growth is driven by higher service penetration rates along with  higher levels of customers taking triple or quad play service plans.

AT&T estimates that three fourths of its U-verse TV subscribers have triple or quad play service with the company. U-verse triple play subscribers generate $170 of ARPU.

Verizon’s  FiOS  service accounts for 66 percent of wireline consumer revenues. Verizon’s consumer ARPU accelerated to 10.3 percent over the same quarter of 2011. Triple play customer ARPU is  $150 a month.

Still, even Verizon and AT&T have to now be looking at how to sustain revenue growth when the underlying fundamentals are shifting. Subscriber growth has become a zero-sum game, though revenue growth can continue for some time, lead by mobile broadband growth.

What to do after that revenue segment slows is the current issue. As a practical matter, none of the developing new lines of business are going to contribute sizable immediate revenue. That suggests a wave of acquisitions is going to happen, as that is the most tangible way of growing subscribers.

ARPU, in that sense, will be a secondary growth driver, once mobile broadband becomes ubiquitous.

AT&T Considering Europe Market in a New Way?

Verizon Wireless, AT&T, China Mobile and mobile providers in India have advantages over suppliers in many other markets, namely a huge internal market. Some would argue that is why AT&T and Verizon have done relatively better than many European providers over the past several years, in terms of internal revenue growth.

But even a large internal market might not be sufficient to keep a very-large telecom provider growing, indefinitely. So it is that the Wall Street Journal reports AT&T is considering acquiring a European operator. The United Kingdom, Germany or the Netherlands reportedly are seen as the most-viable markets.

Whether the move is simply opportunistic, or evidence that AT&T sees some clear limits to U.S. growth, is not so clear. Some might argue European telco assets currently are undervalued, so an acquisition would be a relatively attractive way to deploy capital and gain revenue.

To be sure, the move would be a bit of a change of strategy. Obviously, AT&T and SBC had been looking at international growth opportunities for at least a decade. But up to this point, no particular deal seemed to make so much sense.

On the other hand, one might argue that AT&T has taken a hard look at its growth prospects, and does not see sufficient revenue mass from any of the new sources it is working on, compared to the advantages of "growing by acquisition."

However much AT&T might be hopeful about the new bets it is placing in applications and services, it does not currently appear that any could represent incremental revenue large enough to move the needle for AT&T, in the near term.

Have we reached a point where even a firm the size of AT&T cannot grow fast enough in the U.S. market? Possibly. The other issue is simply regulator objection. The Federal Communications Commission essentially has told AT&T, by opposing AT&T's acquisition of T-Mobile USA, that it cannot grow larger in the U.S. market.

So, like it or not, the obvious corollary is that AT&T will deploy its capital, and try to grow, elsewhere.

Tablets ARE PCs

With talk of a "post-PC" era, the role and understanding of tablets has become a key requirement not only for device manufacturers, which face significant potential disruption of their markets, but for application providers, access providers and others in the ecosystem.

In some ways, the tablet represents a clear new appliance category. In other ways, it also displaces the use of PCs. But there remains some uncertaintly about whether the tablet is a "mobile" device or is primarily an "untethered" device. 

In truth, the tablet is a mix of both. Sometimes it will be used as a "mobile" device, carried by a user outside the home, used outside the home and on a mobile network connection. Most of the time, though, it is used inside the home or office in "untethered" mode. 

That leads some to note, not without justification, that a tablet is simply the latest form factor for a PC. Some might say the tablet is why "netbook" demand has collapsed, for example. 

Pan-EU Telco Infrastructure Talks Are Unlikely to Succeed

Will European telcos be able to create a unified fixed nework infrastructure across borders? Fitch Ratings doesn't think so. 

The proposal, which presumably would have to be ratified and approved by the European Commission, would allow all the contestants to essentially create a continent-wide infrastructure company that would sell capacity and services to any retail operator in any of the participating countries.

If you think about it, this is a bigger version of the infrastructure sharing mobile operators have been doing: sharing towers and sometimes radio infrastructure in ways that lower costs for each of the retail providers.

Doubtless there are pragmatic difficulties, such as technology incompatibilities in some cases. But Fitch thinks the bigger problem simply will be EC regulator opposition to a move very likely seen as the precursor to more consolidation in the EC telecom markets. 

Deutsche Telekom, Orange, Telecom Italia, Telefonica, Belgacom and KPN are among the carriers interested in such a cross-country infrastructure sharing plan. The sharing might not be seen as "consolidation" in the market by some. But regulators might not agree.