Talking in Brussels today at The Digital Agenda Summit, Neelie Kroes, European Commissioner for Digital Agenda, said that broadband development could help boost the European economy by over one trillion euros in ten years, if we get it right. To help this go forward she promised European funding of €9.2 billion to help expand investment in broadband networks. €6.4 billion of this will be used for broadband infrastructure directly, and it's thought that this investment could generate up to €100 billion of further investment, a third of what it is thought to cost to meet Euopean targets.
Investing in the digital economy, and providing infrastructure is expected to help boost the overall European economy, with a 10% broadband penetration increase linked with an annual GDP growth in Europe of 0.9% to 1.5%. With this in mind, it seems an obvious choice to try and get telcom companies investing in next-generation broadband solutions, but there is reluctance to do this with a copper-network still delivering profits.
Alternative operators consider that copper access prices are too high given that the assets are largely depreciated. And they argue that, as a result, incumbents prefer to make good, easy profits on legacy infrastructure rather than invest significant amounts in new fibre networks. Therefore, they believe that lower copper prices would create the incentive for incumbents to go ahead with fibre investment.
On the other hand, incumbents argue that much lower copper access prices would erode broadband retail prices. And, as a result, make it difficult to charge the higher prices for competing fibre products which would be needed to cover the investment costs and risks. In other words, they consider it would be unattractive to invest in a parallel fibre infrastructure directly competing with a cheap copper network, at a time when many consumers do not yet appreciate the major difference, in capacity and service quality, between the two technologies.
I think that there is some truth on both sides. And I also have the impression that, as it stands, it would indeed be difficult to build new fibre networks competing with cheap parallel copper networks.
That is why, in the context of the public consultation launched today, I am very interested to explore possible models which could answer both arguments. Models which could create the right incentives for telecom operators – in particular, incumbents – to invest in next generation networks."Neelie Kroes, European Commissioner for Digital Agenda
Kroes suggests that this could be through gradually lowering prices on copper networks and adapting this where incumbent operations commit to investing in fibre networks. Promoting the switch-off of the older copper networks with a gradual approach to this can help and can reduce costs so that fibre networks break even in under 10 years. Whether this long term investment would be acceptable to share holders if one hurdle that may have to be challenged.