Superfast networks take center stage in new EU telecom rulebook

14th September 2016. By Magnus Franklin

Europe’s telecom operators will need to spend 500 billion euros ($560 billion) to transform its patchwork of superfast networks into ubiquitous connectivity, EU digital-market chief Andrus Ansip has said.

Today’s 249-page proposal to overhaul the bloc’s rulebook for the telecom industry aims to ensure that the goal is met.

The danger is that small operators and online communication providers could end up getting squeezed by a complex text that has bold ambitions, but ample room for unintended consequences.

The European Commission, the union’s executive branch, is proposing to update “framework” legislation originally designed to expose national phone monopolies to competition. That 2002 law has worked, by and large: Consumers in most EU countries today enjoy a decent choice of operators, which constantly scramble to get an edge with new network investments and innovations.

What the industry rulebook failed to do was spread the benefits of this competition to all Europeans. Urban dwellers were spoiled for choice, at bargain prices. But those living in small towns, exurbs and the countryside were often left empty-handed. That is what today’s proposal sets out to fix.

Novel tools

For telecom operators, the new rules present a toolbox full of familiar procompetitive measures plus some novel but untested ways of trying to extend broadband to more remote regions. An overarching theme throughout the new law is a consistent attempt to strike out obsolete or ineffective laws.

As always, the devil will frolic in the details. With all those pages to comb through, loopholes and controversies may only emerge when national governments and the European Parliament begin amending the bill.

The novel elements in the draft legislation are designed to encourage telecom operators to invest in state-of-the-art infrastructure, instead of just upgrading old networks. This contrasts with the previous framework law, which was all about giving new entrants optimal conditions for making a business off the back of the former monopolies’ legacy copper wires.

Companies investing in rural broadband would get a breather under the rules from the threat of incumbent operators engaging in “competitive overbuild.” A Deutsche Telekom, in other words, would be actively discouraged from targeting its network investments in areas where rivals are rolling out superfast fiber.

‘Co-investments’

The new rules also set out ways for operators to “co-invest” in places that still lack superfast connectivity. This allows operators to share the cost of building a network even as it shields them from rivals seeking a free ride on the back of their spending.

Today’s proposal is also less precious about past definitions for competition in the industry, reflecting the reality that the boundary between “physical” and “virtual” network access has blurred. The new law would give national regulators much more leeway to decide which rules are most appropriate to a given situation.

The success of this flexibility will hinge partly on a proposed revamp of the Body of European Regulators for Electronic Communications, which would be converted from an umbrella group of national telecom authorities into a full-blown EU agency. Key to this overhaul is a “double lock” veto mechanism that would make it possible to block national measures if both the commission and the upgraded Berec agree.

Wireless auctions

Another hot-button topic in the bill concerns commission proposals to harmonize national auctions of wireless frequencies. The draft legislation backs off previous commission efforts to create a standardized format for all spectrum auctions across the bloc, pushing instead to get national governments to align the most important features of licenses, such as duration.

Public debate on the bill is likely to focus on whether online communications providers such as Skype and WhatsApp should be governed by rules similar to those applied to traditional telecom operators.

The commission has proposed to split “communications services” into two categories — those that make use of telephone numbers (a limited resource) and those that don’t. This may end up being a reasonable compromise.

But the discussion about “over-the-top” providers is likely to dominate negotiations on the text, making the outcome uncertain.

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