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European Commission

Neelie Kroes

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

Certainty, consistency, competition: a framework for investment

ETNO FT 2012 Summit

Brussels, 2 October 2012

Hello to you all.

In July I announced a significant set of measures for the telecoms sector. A framework to provide the certainty, consistency and competition needed for investment in superfast broadband networks.

Today I want to remind you about the context for that announcement. And to give you some reflections on its importance, and impact.

First, three things to remember about the context we are in.

Today, what concerns us all the most — politicians, businesses, citizens — is the economic crisis. Not just the short-term crisis management: but also how to boost long-term competitiveness, generate jobs and build tomorrow's growth.

Enhanced networks are essential to our future economy, essential to our future competitiveness. I am convinced of that: I know many of you are too.

But we need to convince others too.

The regulatory regime needs to send the right signals. Signals that enhance the prospects for growth in this sector; and in particular that unearth the huge potential in networks providing high-speed connectivity.

But we also need to show investors that the European telecoms sector represents a growth story. A sound long term investment, and a credible way to rebuild our economy. Overcoming that chilling factor is our main challenge, going beyond the finer details of this or that regulation.

This growth story is waiting to be told. Just look at how, over recent decades, people have taken to new technology: and valued its benefits .

Many products that ten years ago were a luxury, are now lifestyle essentials: which people don't think twice about spending money on.

Just look at all the new products and services that could come onto the market in future, from cloud computing to connected TV, online Universities to virtual operating theatres, smart cities to the Internet of Things. Think how much value those will add to people's lives, businesses' bottom line, government services. And how much they will be prepared to pay to get that value, via fast broadband services.

The second piece of context to remember is the historic success of EU telecoms policy. 10 years of liberalisation and openness to competition have delivered wider choice, more convenience, and lower consumer costs. People enjoy multiple, tailored services; call costs have tumbled; while the most dynamic operators find new ways to expand and develop. This is progress for our citizens and our economy. Who could now imagine going back to the world of the eighties?

We should build on that. But that doesn't mean taking the same approach with the same rules.

Because now we're in a changing world: a transitional phase to a new generation of high-speed networks, co-existing with the old. That transition carries a price tag, and poses special challenges. Our objective is no longer just to open up one, existing, network: but to build or upgrade to new networks, for superfast broadband.

So let's recognise what we achieved in the old reality, but tailor our action to the new.

Sustainable competition is still important, and access is still important: but there's little use enforcing access to a network that does not yet exist. By focusing on those issues essential for healthy competition, we can potentially lighten regulatory intervention elsewhere.

Third, we should never forget how quickly and dynamically technology is changing. Incremental solutions, such as upgraded cable, or combining fibre and copper, can deliver cost-effective high-speed broadband;. driving consumer appetite for bandwidth, without running too far ahead of current demand. And today, it's clear that 4G wireless networks can offer fast, effective connections, with real potential to exercise a competitive constraint on broadband. Provided, of course, that member states have made the spectrum available.

And meanwhile, of course, fixed and wireless are also working together, with the fibre network helping deal with the avalanche of wireless data; with satellites distributing high-volume data in hybrid systems as well as directly serving remote regions; or using the possibilities of WiFi.

Our regulatory framework should and will recognise that competitive reality.

But also, it means other policy tools come to the fore, like the radio spectrum policy programme.

Radio spectrum is becoming ever more relevant to our broadband goals. And ever more important to citizens. Where countries don't make enough spectrum available, quite simply their citizens can't enjoy 4G connections on the latest gadgets.

And without a European approach to spectrum, and without faster 4G roll-out, device makers won't take Europe into account when planning their latest smartphones.

Those are the three bits of context underpinning our July announcement on the regulatory framework.

And here are three reflections I'd like to make about it.

First, our announcement provides the certainty needed for long-term investment, with durable rules until at least 2020.

It also offers consistency within our single market. With a consistent cost methodology for wholesale prices, the regulated copper price can gradually converge and stabilise in real terms, around the current average.

Finally tougher non-discrimination rules mean a more sophisticated level of competition—on quality, bandwidth, service and of course on price. Ensuring more effective guarantees of equal access for third party operators.

Doing these things allows us to lighten regulatory obligations where there is a sufficient degree of competitive constraint. Whether it's competition from alternative operators accessing copper networks; or from other infrastructures. This means greater pricing flexibility for network owners; and in turn a greater chance to explore new business models and develop consumer interest in higher bandwidths. In essence, it gives more ways to get a better return on network investment.

I know not every bit of that package is perfect for everyone. There are many competing interests to balance.

But our job is to find, not just a compromise between those different interests: but the best outcome for everyone.

The win-win situation.

Because this isn't a squabble about who gets a bigger or smaller share of the pie. It's about making the pie bigger. The more people get ultrafast access, the more they will demand new online applications; the more market players will supply them; the more their neighbours, families and friends will see those great benefits. And the more demand will soar. As demand grows, will create a growing business in supplying connectivity : and boost revenues.

That's good for you, it's good for consumers, it's good for the economy: and that's the environment we are creating.

Second, I know that however good for investment the regulatory framework is, it will never be the whole story; in some areas, the business case will always be harder to make.

Public support, including EU funding, can help. Innovative financing can reduce project risk, and leverage private investment; and, in the most isolated areas, national or structural funds can provide grants to ensure access for all.

The Connecting Europe Facility could leverage at least €50 billion for broadband investment, providing fast connections to around 45 million households.

This is essential to our economic future. I am delighted that ETNO supports our "Connecting Europe" proposal. But now we need to persuade MEPs and national governments of this case: and urgently. Later this afternoon we have a conference on the CEF; I will be setting out just how much this investment means, and how much, without it, we would be depriving our citizens and our economy. I hope you will also help me make that case. Let's face it – if you want to build consumer demand for higher bandwidth, and willingness to pay for it, then the bigger the footprint of enhanced networks, the better it is for you too.

The final point I'd like to make today is that, in a legal sense, our July proposal provides continuity; operating largely within the current legal framework. But in terms of real-world impact, perception, and market confidence, it's a huge step forward.

Our main purpose was to make investors confident that fast broadband networks are safe, profitable, and worthwhile.

And to show them that public policy-makers don't just talk about investment needs: but understand what drives real-world investment decisions.

It's worked. It's changing perceptions. Analysts are confirming that this investment can offer attractive future returns: confirming that it's a growth story.

Here in ETNO you are celebrating your 20 year anniversary. Congratulations. In that time, you have played a great role in championing this sector, and its central role in our economy. Now we also have a common goal and a common interest: to see every European digital with access to fast broadband.

With our July announcement, we've set the machine in motion. We have set the framework where investment can happen, and will be formally implementing over the next few months. We are proposing the financial support to reduce risks for more borderline commercial investments. And we continue pushing for the rich online content to help you make your business case – with actions from the cloud to connected TV.

But now it's over to you. You can help us turn the Connecting Europe Facility into reality. But most of all, only you can make the plans, and commit to invest.

Your future growth, and Europe's, depend on it.


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