Telco CFOs call for structurally separate netcos to operate Europe’s fibre networks

Commission and regulators should focus on making the economics work for fibre roll-out and avoid political deals with dominant firms, companies stress

30 March 2011, Brussels: Chief Financial and Operating Officers from leading telecoms competitors met today with the European Commission and major banks to exchange views about the conditions needed to allow investment in ultra-fast fibre networks, at a roundtable event organised by ECTA.

The roundtable comes at a critical time as the Commission explores ways to deliver the challenging “Digital Agenda” target of 50% of consumers using 100Mbit/s by 2020.

CXOs highlighted that a “utility” model in which a single fibre is installed which is open to competition would best limit costs and risks of investing in fibre. Fastweb and Wind presented Italian proposals in which telcos jointly invest in a structurally separate “netco”. Fastweb CTO explained: “Only the set-up of a FiberCo - separate from the operators providing downstream services - in charge of rolling out and managing the infrastructures and providing wholesale services to third parties - guarantees a return on investment while safeguarding competition”. Several countries have experimented with models in which telcos co-invest with local authorities or specialists in infrastructure.

Whilst the CXOs were optimistic that there is a business case for fibre if traffic is collected on one network, a key concern raised by the companies was that incumbents, whose participation is essential in any fibre roll-out strategy, lack the financial incentive to invest because in many cases they have been able to charge much higher rates for their legacy networks than it cost them to provide it. “Incumbents have had a real windfall from their legacy assets,” said Tom Ruhan, Chairman of ECTA, “but now is the time to wean them from relying forever on the networks they inherited from the days of public ownership. The Commission should make clear that the era of supernormal profits for copper is over – it is time for incumbents to work with others and invest for the future.” 

Companies also agreed that once an open fibre network is in place, customers should be migrated as quickly as possible to limit costs and ensure consumers benefit immediately from the additional capacity fibre has available.

Ruhan continued: “We have an opportunity to encourage new open models in which fibre networks are run separately from retail broadband services. However, to change the business model, regulators must use all the tools at their disposal and resist the temptation to make political deals with incumbents in exchange for empty promises on fibre investment. History has shown time and again that relaxing competition rules does not benefit consumers or increase investment. Incumbents will invest in fibre on their own or in a consortium if the business case stacks up and is more profitable than sweating their old network. Policy-makers can stimulate investment through their approach to regulating wholesale charges, they can encourage consumers to take-up fibre through strategies to “switch-off” copper and they can promote efficient business models through financial instruments.”

Vice-President Kroes has asked CEOs from across the industry to advise her on the steps that are needed to drive fibre roll-out across Europe. Conclusions are expected on 13 July. “We trust this event provided some useful input on the financial aspects of fibre investment decisions and consumer behaviour,” said Tom Ruhan, “and that these issues can be considered in the wider CEO forum.”
(SOURCE: INTUG)