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Connectivity for a European Gigabit Society – starting today?

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The European Commission proposed in September 14 a “connectivity package” containing, amongst others, a Code to overhauling the current EU telecoms rules and an Action Plan for 5G, aiming to meet Europeans' growing connectivity needs and boost Europe's competitiveness.

Intel welcomes the Commission proposals and the associated connectivity targets for 2025 of 100Mbps (upgradable to Gigabit speeds) to all European households; of gigabit connectivity for all main socio-economic drivers (schools, transport hubs, main providers of public services, digitally intensive enterprises) and of 5G in all urban areas and major terrestrial transport paths. The estimated investment needed to achieve these objectives is calculated as being c. €500 billion. According to Commission calculations, that is an additional investment of €155 billion, to complement the investment of €360 billion that could be expected from telecommunications operators over the 2016 to 2025 period.

Intel has been advocating that the regulatory framework is an important factor in driving investment in high capacity broadband infrastructure. Our view is that where consumers have a real opportunity to switch among competing facilities, mandatory access obligations on new NGA (e.g., last mile FTTx) investment are not necessary to protect competition and unduly discourage broadband investment. Indeed, they may well discourage new entrants as well as incumbents from investing in new last mile facilities.

Intel applauds the new “European Electronic Communications Code” proposal of adding a new policy objective of widespread access and take-up of very high capacity connectivity. The Code guides national regulators in giving more emphasis to the forward-looking assessment of market conditions, retail market constraints, access agreements and co-investment among operators, and access to civil infrastructures when going through a market analysis to determine the need to impose any ex-ante regulation.

In past blogs (see Portugal continues on the successful path towards broadband market deregulation and Romania Deregulates Broadband Market) Intel has highlighted the case of Portugal, a country with the largest FTTH footprint in Western Europe (and the third largest in the EU) where its regulator, ANACOM, has taken a successful regulatory approach that encouraged infrastructure-based competition in NGA networks (fibre and cable). In brief, it spurred new fiber investment by the incumbent and competitors. In its last market analysis ANACOM--based on its assessment of market conditions, the proportionality of obligations and conditions to be imposed and any regulatory impacts on incentives to invest--decided not to impose any wholesale access obligations on the incumbent’s last mile fibre. Intel recognizes many similarities between the approach that the Commission is now proposing and the Portuguese best practice case. Ironically, the European Commission opened a phase II investigation due to doubts concerning failure to impose regulatory remedies with regard to fibre networks on either local or central access markets in Portugal. BEREC agreed that the Commission’s serious doubts are justified. ANACOM disagrees because it considers that imposing an access obligation on fibre in areas where the incumbent has practically no fibre for the time being would not be adequate, proportionate or justified. Moreover, Portugal has strong measures in place to provide access to physical infrastructure (in particular ducts and poles) and in-house wiring infrastructure that have showed to be sufficient to promote investment and competition. At bottom, where there are competing alternatives the ANACOM approach has given Portuguese consumers more fiber and a choice. And given that services and rates are available nationally, even where at the moment there is no competition, consumers get its benefits at the same time that the regulator preserves strong business incentives to invest in NGN facilities as that becomes feasible.

The Portuguese case is a poster child of the potential benefits to be gained from pursuing the Commission’s regulatory option to provide necessary incentives for both incumbents and competitors to make economically viable investments or co-investments in future networks that are in principle capable of providing very high capacity connectivity to every citizen and business in Europe.

Let us hope that the outcome of this investigation does not curtail Portugal’s record of pro-consumer FTTx investment and that the march towards a connected European gigabit society can effectively continue in Portugal.