EU toward a common regulatory framework for broadband
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). NGAs are required to deliver high-definition content (such as high definition television) and interactive applications. The objective of a common regulatory framework for NGA is to foster a consistent treatment of operators in the EU and thereby ensure the necessary regulatory predictability to invest.
The Commission is consulting on the basis of a draft Recommendation which suggests definitions for harmonized categories of regulated services, access conditions, rates of return and appropriate risk premiums. The public consultation will be open until 14th November 2008. The Commission will then finalise the Recommendation in the light of comments received and formally adopt it in 2009.
The deployment of NGA is indispensable to deliver new broadband services to European consumers. Despite some large-scale rollouts of new broadband infrastructure in a number of Member States, Europe appears to be still lagging behind other economies, notably the United States and Japan.
Viviane Reding, EU Telecoms Commissioner states "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."
Basic principle for NGA regulation in the EU
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 fibre.
However NRAs should also impose further physical access obligations (access to unlit fibre) 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.
Recommends method for calculating rates of return
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.
Background
There are 229 million copper lines in the EU (source: Idate, Digiworld yearbook 2008), against slightly more than 1 million fibre connections. Analysts forecast a further €20 billion spending on NGA by 2011.
The objective of the Commission's Recommendation will be to foster the application of consistent access remedies on dominant NGA operators. It builds on the European Regulators Group ("ERG") opinion on regulatory principles of NGA submitted to the Commission on 1 October 2007.
The Commission's public consultation document can be found at:
http://ec.europa.eu/information_society/policy/ecomm/
library/public_consult/nga/index_en.htm
Input to the Commission's public consultation can be sent to:
infso-b1ext@ec.europa.eu
See also:
http://ec.europa.eu/information_society/newsroom/
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