A Fibre-Rich Diet for Europe: Is the EU’s Next Generation Access Strategy Compromising on Competition?

Given the unsatisfactory deployment of fibre based Next Generation Access (NGAs) networks in the EU, the European Commission proposes in a draft recommendation from December 2012 that wholesale prices for access to the copper networks should be between €8-10.

This means that the former monopolists who own the copper networks would be allowed to continue to charge high wholesale prices, or even substantially increase their charges to competitors in the coming ten years. The objective is to incentivise and compensate for the necessary investments to reach the ambitious goals of the Digital Agenda to expand bandwidth and improve connectivity in the EU.

However, this policy is based on a series of erroneous assumptions – to begin, there is no evidence for unprecedented capacity shortages ahead, or that the market mechanisms and current pace of technological up- grade will not be able to cope with them. Furthermore, a shift towards the gradual deployment of fibre (under so-called FTTC) is less costly yet can reach similar speeds as envisioned under FTTH and will render any compensation for risk or investment unnecessary. However, fixing wholesale prices would limit competition that is the key driver for investments. It would remove incentives for competitors to deploy fibre and risk the re-monopolisation of the future broadband market. Yet no additional investments would be created, as funds are simply moved from one operator to another. Instead, the EU needs to either incentivise demand or investments in a non-discriminatory manner consistent with the values of the Single Market.