Brussels, 18th September 2008
Broadband: Commission consults on regulatory strategy to promote high-speed Next Generation Access networks in Europe
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). NGA optical fibre-based networks enable bitrates several times higher than those currently available on traditional copper wire networks. 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, addressed to the regulators in the 27 EU Member States and suggesting 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.
EU Competition Commissioner Neelie Kroes said: "The deployment of new fibre-networks will shape the competitive conditions of the future. We need an appropriate framework to give European companies fair access to the new networks. We want national rules that will not only encourage the necessary substantial investment in fibre investment but also strengthen broadband competition."
"For consumers, whether private or business, to benefit from the competitive provision of services over optical fibre, it is vital that the Commission provides the regulatory guidance the market needs", said Viviane Reding, EU Telecoms Commissioner. "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."
The deployment of NGA is indispensable to deliver new broadband services to European consumers. While a number of operators, both incumbents and alternative operators, have launched 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.
The Commission is committed to ensuring that the transition to NGA takes place in a consistent, efficient and timely manner. To this end, it is consulting on the regulatory principles it considers the most appropriate to foster investment in NGAs, while at the same time strengthening competition.
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.
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.
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.
Broadband access is currently regulated by national regulators. 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:
The work of the ERG on NGA is available at: http://www.erg.eu.int/doc/publications/erg07_16rev2_opinion_on_nga.pdf and http://www.erg.eu.int/doc/publications/erg_07_16rev2b_nga_opinion_suppl_doc.pdf
Input to the Commission's public consultation can be sent to:
See also MEMO/08/572