Thursday, September 18, 2008

EU Considers Strategies for Promoting Next Generation Access Networks

The European Commission has launched a public consultation on the regulatory principles to be applied by EU Member States to Next Generation Access broadband networks (NGA). Specifically, the EC is seeking proposals on a common regulatory strategy best suited to promote the rollout of fiber-based access networks. There are 229 million copper lines in the EU, compared to slightly more than 1 million fiber connections. Analysts forecast a further EUR 20 billion spending on NGA by 2011.


The basic principle of the Commission's draft Recommendation is that national regulatory authorities should provide access to the networks of dominant operators at the lowest possible level. In particular, they should mandate access to the ducts of the dominant operators allowing competitors to roll out their own fiber. However, National Regulatory Authorities (NRAs) should also impose further physical access obligations (access to unlit fiber) beyond access to ducts where ducts are not available or the population density is too low for a sustainable business model. Access to active elements such as "bitstream" shall be maintained provided lower level remedies do not sufficiently address distortions of competition.


The draft Recommendation provides also a common approach to ensure non-discriminatory access, as well as a methodology for calculating a proper rate of return, including a risk premium. The Commission believes that for NGA, rates of return should be derived in the light of the risks associated with this kind of investment, bearing in mind that the nominal pre-tax weighted average cost of capital for fixed and mobile operators has been roughly 8 to 12% in recent years.


EU Competition Commissioner Neelie Kroes said: "The deployment of new fiber-networks will shape the competitive conditions of the future. We need an appropriate framework to give European companies fair access to the new networks. We want national rules that will not only encourage the necessary substantial investment in fibre investment but also strengthen broadband competition."


"For consumers, whether private or business, to benefit from the competitive provision of services over optical fibre, it is vital that the Commission provides the regulatory guidance the market needs", said Viviane Reding, EU Telecoms Commissioner. "We want to reduce the scope for divergences of regulatory approaches across Europe, in the interest of legal certainty. Uncoordinated or even contradictory action of national regulators as regards Next Generation Networks could seriously damage competition and undermine Europe's single market. We propose in particular that project-specific risk premiums should be applied, so that competition can flourish while those who invest are rewarded in line with the risks they have incurred."


The public consultation will be open until 14th November 2008. The Commission will then finalize the Recommendation in the light of comments received and formally adopt it in 2009.http://www.europa.eu

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