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SPEECH/12/166

Neelie Kroes

Vice-President of the European Commission responsible for the Digital Agenda

Unblocking the broadband bottleneck

Cable Congress of the European Cable Communications Association

Brussels, 8 March 2012

Today Europe faces the human consequences of crisis. Our citizens, especially our young people, are haunted by horrific prospects of unemployment. To tackle this, we need growth. Growth to stabilise public budgets, growth to provide jobs for those young people, growth to guarantee our high living standards. All our actions must take that context into account.

And if we are to fuel our economic future, we must invest in innovation. That means ICT: which both drives innovation and enables it.

But today, Internet networks are getting busier and more clogged. Internet traffic is doubling every two to three years. The increasing choice of on-demand services can mean multiple claims on available bandwidth; even within the same household.

Our broadband objectives are economically essential. But, it's clear they will need significant investment.

How do we achieve that investment? Well, I know some ways we won't achieve it.

Some have argued that for investment to happen we need to reverse the regulatory successes of the past decade.

They claim we should grant operators a regulatory holiday. Whether it's by allowing the re-monopolisation of fibre networks rolled out by dominant players. Or whether it's by letting mobile operators charge disproportionate termination rates or extortionate roaming tariffs, tariffs unrelated to underlying costs. They want a "holiday"—from the stress of innovating in a competitive market—and a return to an "idyllic" business environment sheltered from real competition.

This is not the right way forward.

Remember, once, there were some industry players who thought the networks for telephones and later broadband were their unique stronghold. Remember that disruptive competition disturbed their complacency. And remember that the resulting market momentum ultimately meant better results for everyone. Because it made all parts of the industry focus on their customers' needs, and look ahead to the future, delivering better and cheaper services for the benefit of European consumers.

We need to learn from that. The answer is more consumer choice, not less: promoting competition and innovation, not stifling it.

Of course, anyone in my position will be heavily lobbied, and all sorts of arguments will be alleged about tempting "shortcuts" in the other direction. But I deeply believe in competition: it has delivered innovation and investment in the past; it will do so in the future.

And that means competition that is real and effective. Because it's not enough just to let different retailers rebrand and resell wholesale products that are all, fundamentally, the same.

Rather, we should open up markets to the maximum extent possible, stimulate competition in every link of the chain, and deliver the maximum possible consumer choice; the maximum possible market opportunity.

This applies to the fixed network of dominant operators, where we should allow alternative operators to deploy their own equipment and provide innovative and competitive services. And this on the basis of effective unbundled access, at a fair price and on non-discriminatory terms. Because that is also a form of platform competition!

But you know, I often find it ironic when people criticise our pro-competitive regulation, and caricature it as merely enabling resellers to free-ride on others' investment. Because it's often the very same people who also lobby to take away obligations on dominant players to unbundle. And thus to remove a key enabler of competitive investment in the broadband value chain, limiting it to bitstream "resellers". But ladies and gentlemen, I don't believe in "managed competition" with dominant players. No more than I believe in "managed democracy"!

The same argument also applies for mobile termination rates. Those rates should reflect the real costs of efficient operators; they should avoid distorting competition between operators whether fixed or mobile; and they should promote consumer welfare.

And the same argument applies again to the roaming market, where we have to tackle the lack of competition. We have to give consumers a greater and easier choice, and to let them benefit from lower prices.

The people who argue against this pro-competitive approach claim it would take away the incentives to invest in next generation networks. No, it wouldn't. On the contrary: if such networks are open to competition and innovation, consumers will be willing to pay a fair price for services that respond better to their evolving needs. That increased demand for enhanced services is essential to sustain investment in tomorrow's networks. Because at the moment, even in those areas where very high speeds are on offer, by cable or other means, consumer take-up is still very limited.

But you know me by now. I don't believe in regulation for the sake of it. In some areas we can adopt a lighter approach: where competition already exists, or where it can be sufficiently safeguarded by applying competition rules ex post. And that is why we are reviewing the list of regulated markets, to see if in some cases ex ante regulation is no longer necessary.

But, I repeat: cutting off competition is not the way to promote sustainable investment up to 2020.

Because we have to realise there is no magic solution to achieve our ambitious targets overnight. If there were, we would have picked an earlier date than 2020.

Rather, we will meet those targets with a gradual approach based on a mix of technologies. Whether it's fibre to the home, fibre to the cabinet, next generation mobile solutions, or of course upgraded cable: they all have their part to play. We need a complementary combination of solutions, introduced incrementally, and tailored to local needs.

Because even if today it's not possible for some technologies, like 4G wireless or FTTC, to really provide 100 Megabits, it can still take us a step towards our target. It will already give the consumer a taste for the benefits of higher-speed broadband, stimulating a vibrant content market and a virtuous circle of supply and demand that will take us to 2020.

This is one area where the cable industry should be proud: you have already shown your versatility. Upgrading cable networks has already hugely boosted broadband speeds for relatively little cost. And it has already helped get more and more people online with faster and faster access.

I was delighted to hear today that at least 17 million households subscribe to cable broadband with an average speed of 25 to 30 Megabits. And that, thanks to cable, at least 60 million households can access 100 Megabit broadband or higher.

This investment you have made - and its effect on broadband markets - is something I recognise: and something I congratulate you for. So I think regulators, should promote, not penalise, cable investment. Also by the way by allowing cable companies to reorganise and, where appropriate, consolidate their business, to increase their efficiency.

If such investment in new or upgraded networks could happen on its own all across Europe, then maybe we wouldn't need any further public intervention, nor further changes to the market framework.

But there are still other things we can and must do to promote investment.

In particular, well-tailored public interventions can cut risks—and cut costs.

Our proposed Connecting Europe Facility would reduce the risk associated with broadband projects; and it will "crowd in" private investment.

Meanwhile the state aids framework, currently undergoing a "health-check", also makes it easier to support broadband investment with public funding—without unduly distorting competition.

What's more, we can cut the unnecessary costs involved in rolling out broadband. Like the cost of expensive public works projects which lead to wasteful duplications.

That's why I'm delighted the European Council last week agreed on the need to make broadband rollout cheaper. And agreed with our ideas for how to realise this vast potential saving. I plan to take those proposals forward to the College of Commissioners this year.

And I hope I can count on your support. Cutting these costs could significantly swing the balance of a broadband business case. It could make it easier to get every European digital: and stimulate a vibrant market in ultrafast broadband.

Alongside that work, we should also work to boost content, and feed the virtuous circle. At the moment, 3 in 5 of those without home broadband say it's because there's nothing interesting for them online.

So I want to support new developments in content, like Connected TV. We know people are already happy to pay for high-quality TV services. What if they could combine their favourite TV programs with the best of the Internet, or indeed special on-line services? With features that are interactive, on-demand, or social?

Well, you won't have to wait long to find out: within 2 to 3 years, 90% of TVs sold in Europe will be internet-connectable. 90 per cent. So later this year we'll be producing a policy paper on Connected TV, to make sure we're ready to let this market flourish.

And here's another development we need to support: cloud computing. Not because it’s a new trendy buzzword. But because it's where the future will be: and that change needs to happen not to us, but with us. With many other technologies we've seen problems getting in the way – fragmentation, lock-in, and public sector ineffectiveness. The cloud computing strategy I'm currently preparing will anticipate those problems so we can prevent them. But if we want to use the cloud effectively, that underlines all the more the need to have robust broadband networks in support.

That's the real answer to unblock investment. Not by suffocating competition. But by supporting a mix of technologies. By cutting risk and costs. And by stimulating a vibrant content market.

So today I'm saying to you: let's do these things, and let's make that investment. Let's unblock the broadband bottlenecks. And let's watch the innovation and creativity pour out.


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