What price keeping the old guard happy?

So it seems Neelie Kroes, the European Union’s digital champion, has ruffled a few feathers in the industry this week after announcing her proposals for encouraging investment in the EU. As she said in her speech to Brussels this week: “We cannot let our networks be the bottleneck for this amazing opportunity: we need investment in new high-speed infrastructure.”

One of her proposals is to ‘level the playing field’ by ensuring that incumbents can’t charge third parties more than they do for their own retail unit. Indeed, this wholesale model is how it works in the UK with Openreach, which manages BT’s network, spun out from the main in 2006.

Kroes clearly recognises that work needs to done to get fibre wending its way across Europe, which is going to be essential to reach its target of achieving 30Mb/s to all homes. Of course you don’t need full fibre-to-the-home to achieve that, but you will need fibre-to-the-cabinet to offer it, and for that you’ll need, well, fibre.

However, ECTA, the European Competitive Telecommunications Association has got upset over one aspect of Kroes’ speech. While Kroes agrees that incumbents can’t charge other companies more than they do their own retail arms, has said she does not believe that is necessary to force the operators to lower the prices their charges smaller companies wishing to access their networks. Her view was that the €9 ($11) per month wholesale copper pricing was reasonable.

ECTA’s chairman Tom Ruhan was quite blunt in his assessment of this. “We deeply regret the approach that Mrs Kroes is suggesting on price methodologies. As a result of this approach incumbents will not only be allowed to regain full monopolies on future networks, they will also be allowed to continue overcharging consumers and starving competitors on existing networks. This is a departure from the approach taken with the NGA Recommendation in 2010 and might take Europe back to the pre-liberalization era. The EU already lags behind other regions of the world when it comes to super fast broadband – an important enabler of economic growth – and these measures will set us further back”.

So what has Kroes done? Has she betrayed her principles or has she got it right. Our take is that she has taken a cold, hard look at the facts on the ground and takne the view that it’s not worth cutting off the telcos food supply. They might be grizzly old bears, but if you turn on them they’ll take a swipe at you and then skulk off back to their caves, without (if you’re still following this rather convoluted metaphor), investing in the fibre broadband networks that Europe very much needs.

Whether this is the right approach only time will tell but we’ll be hearing more about her strategy for delivering fibre broadband to Europe in her keynote speech that will be opening the Broadband World Forum in October.

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