ECTA calls for end to unfair subsidies for incumbent telcos
ECTA calls on Commission’s Vice-President Kroes to end unfair subsidies for incumbent telcos
"Consumers and competitors should not have to pay excessive charges to dominant firms that are not investing in Europe”, says ECTA Chairman Tom Ruhan
Brussels, 28 November 2011: CEOs of major telecoms competitors have called on Commission Vice-President Neelie Kroes to put an end to excessive charges for historic telephone networks, which they say amount to a subsidy for dominant firms. In a meeting with the Commissioner for the Digital Agenda, CEOs emphasised that there was no justification for paying more than the real cost of copper networks, when incumbents are failing to invest in new high speed infrastructure. An April 2011 study by consulting group WIK, found that the level of wholesale charges in some countries could be as much as double the amount that it actually cost incumbent operators to build the networks decades ago.
Tom Ruhan, Chairman of ECTA, said "despite the extra profits made from excessive copper pricing by incumbent operators, investments in the roll out of ultra fast fibre networks in Europe are not taking place. European consumers and competitors should not have to pay excessive prices to dominant operators for them to distribute high dividends to their shareholders and invest outside of Europe. European competitiveness will be further undermined as a result”.
The Commission is engaging in a major consultation exercise on how telecoms charges should be set across Europe. One of their proposals is that higher copper charges could be permitted if incumbents commit to building modern fibre networks, which are capable of offering much higher speeds.
Tom Ruhan continued: "If dominant firms are permitted to subsidize the investment on fibre networks by allowing them to keep making – or even increase – the excessive profits on their legacy networks, then these subsidies must be shared for the benefit of all, and not only for the benefit of dominant firms. It must be made clear that dominant operators that receive excess profits from their legacy networks paid by their customers should pay the money back by reducing charges on high speed fibre networks. Alternatively, the money could be channelled into a fund available for other potential investors in open fibre networks.”
Vice-President Kroes launched a public consultation to seek information on setting wholesale telecoms charges and addressing discrimination by dominant firms. ECTA strongly supports these initiatives.
Wholesale charges have a significant impact on retail prices for broadband and the level of choice in the market. In many countries prices for legacy copper telephone lines have been set on the basis of what it would cost a theoretical operator to build a new network today (so called "current costs”) rather than the actual ("historic”) costs that were incurred by the dominant firm. This leads to incumbents making supernormal profits on the assets they inherited from the monopoly era, which have largely been written down.
Because of the extra profits made from legacy infrastructures, dominant operators do not see the business case to invest in ultra-fast fiber infrastructure Europe. Extra profits are normally redistributed to their shareholders or invested in more profitable emerging markets outside of Europe to the detriment of EU competitiveness.
One option examined in the Commission’s consultation is the possibility that copper access charges could be reduced to their historic costs unless dominant firms show credible intention to invest in fibre. ECTA believes that keeping allowing regulated excessive profits would amount to public subsidies which should be redistributed equally to consumers and competitors by guaranteeing the roll out of fibre infrastructures open to competition at low prices and allowing equal access to the subsidies for all potential investors.
The consultation on the Commission’s proposals on wholesale charging methods ends 28 November. The Commission is expected to produce a Recommendation on this subject in the course of 2012.
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