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Europe seeks to spur building of fast broadband networks

By Claire Davenport

BRUSSELS (Reuters) - The European Commission has set out rules aimed at reducing the cost of building high-speed broadband networks, in a move that shows how Brussels is seeking more power over the telecoms sector.

The initiative is important because European leaders are worried that debt-laden telecom operators' slow pace of investment is saddling the region with weak infrastructure that over time could hobble its already recession-wracked economies.

It also comes as the EU cuts funding for broadband rollouts. EU budget cuts, which must be approved by Parliament, hammered out in February cut such funding for rural projects to just 1 billion euros ($1.3 billion) from 9.2 billion.

The draft regulations issued on Tuesday, which Reuters reported in early February, requires new and renovated housing to be broadband ready, calls for ducts and other infrastructure to be shared among telcos on fair and reasonable terms and shortens the permitting process.

It also calls for water, electricity and gas companies to share their underground ducts with telecoms firms to cut the cost of creating high-speed broadband networks.

The Commission said digging up streets to lay fiber accounts for up to 80 percent of the cost of deploying new networks, adding that the new rules would save up to 60 billion euro.

The construction in Europe of fiber networks lags far behind Asia and some parts of the United States, worrying policymakers who see the infrastructure as a key motor for economic growth. Europe had 5.95 million fiber broadband customers by mid-2012, a fraction of the more than 58 million subscribers in Asia.

About half of Europeans still rely on internet technologies such as ADSL, which offers speeds of up to 30 megabits per second compared with 100 megabits or more for fiber.

Hampering the buildouts, the continent's debt-laden telecom operators such as Telefonica and Telecom Italia are wary of ploughing billions into fiber when the investments will take decades to pay off.

Another major obstacle has been the patchwork of regulations in the 27 member states of Europe on how telcos must share access to ducts and lines into homes, the cost of such line rentals, and also the technology deployed.

SHARED ACCESS

For example, in France, the telecoms regulator has said operators must share access to the final part of fiber into the home. But Spain hasn't gone that far, and in Germany, the regulator has backed Deutsche Telekom's plan to delay fiber and rely on another technology, known as VDSL, instead.

Each country also sets their own prices for competitors to rent space on each others' networks.

"This shows that the European Commission is interested in centralizing control," said analyst Robin Bienenstock at brokerage Bernstein.

A Commission source told Reuters the proposals were not about centralized planning but converging regulatory approaches to make them more consistent.

"In most places, today's rules hurt Europe's competitiveness," said European Commission Vice President Neelie Kroes in a statement. "Everyone deserves fast broadband. I want to burn the red tape that is stopping us for getting there."

The proposals are part of a bigger package of measures being rolled out by the Commission in coming months to try and deliver a single market for telecom services.

The Commission plans to present its ideas on the single market by October for debate by countries. The proposals may include tighter control of new mobile spectrum and changes to how prices are set for operators to rent out space on the networks of competitors, analysts have said.

Telecom bosses also hope the initiative will lead to a more permissive approach on mergers in the sector, although the top antitrust regulator in Brussels remains wary of such moves.

The ECTA, a trade body representing alternative operators that challenge former state-owned telcos, said it welcomed the effort to reduce the cost of broadband roll-outs.

"Reducing those costs would speed up the deployment of open networks and the provision of competitive communication services to businesses and consumers," said Tom Ruhan, ECTA's chairman.

ETNO, the lobby representing traditional telecom operators, said the Commission's rules should focus on where fiber projects were not getting off the ground, such as rural areas.

"This welcome step needs to be complemented by further reforms of the overall regulatory landscape aiming at targeting regulation to uncompetitive areas and real bottlenecks," said Daniel Pataki, ETNO's director. ($1 = 0.7763 euros)

(Additional reporting and writing by Leila Abboud; Editing by David Holmes)

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