Europe's DSL broadband inertia

Unsurprisingly, the European Competitive Telecommunications Association's (ECTA) latest local loop unbundling scorecard has once again recorded the glacial pace of the process across Europe. As of January 2002, just 0.01 per cent of incumbent telephone lines had been unbundled to new entrants.
This is a sorry state of affairs for Europe's communications authorities who had thought the legislation would introduce competition into the last bastion of incumbent monopolistic power and kick-start the roll out of new DSL broadband services. In reality it has done neither.
ECTA's figures also reveal that DSL penetration across the EU's telephone networks is just two per cent. Moreover, of the 4.1 million DSL lines in operation, says the report, new entrants provide just three per cent.
'Local loop unbundling is not delivering a competitive market in local connections for Europe's businesses or consumers. The few entrants left in the market are, in most countries, unable to co-locate and acquire lines on a timely or economic basis,' says Phil Evins, ECTA's managing director.

Pressure

The situation has prompted ECTA's chairman Kevin Power to write to each Member State's head of government - in advance of the upcoming Summit - urging them to take action to ensure the EU meets the 'e-Europe' targets set down at the Lisbon Summit in March 2000.
'Europe needs to take immediate, concerted action to deliver a competitive, broadband Europe,' says Power. He says that ECTA endorses the OECD's primary recommendations on broadband access - infrastructure competition; network element competition, such as line sharing; open access to cable networks where warranted - but believes that four further practical policy elements need to be added.
Powers believes that EU governments should:

• Now commit to provide their national regulators with effective powers, political independence and sanctions to ensure compliance with EU law as it stands today. 'An important part of this commitment is the provision of effective remedies, so that incumbent operators face swift and effective penalties if they are in breach of their obligations,' he says
• Require the complete divestiture by incumbent operators of all of their remaining stakes in their main fixed line potential competitor; a cable TV operator for example
• Reaffirm their commitment to the objectives and timetable agreed at Lisbon, and put in place interim success measures so that corrective action can be taken if necessary to ensure that these are met
• And that the Commission should provide practical guidance to NRAs as to how they should implement virtual local loop unbundling (LLU), that is, the wholesale and interconnect products that need to accompany the physical LLU procedures set down in the LLU Regulation and continue to enforce its cost-orientated recommendation on leased line pricing.

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Super Regulator

The effective failure of Europe's National Regulatory Authorities to oversee local loop unbundling of their respective national incumbents begs an important question: 'should there be an EU-wide, "super regulator" to oversee the regions transition to broadband?' After all, there is consensus among EU leaders that a competitive broadband infrastructure is vital for the continued economic success of the region.
Yet a year on since mandatory unbundling legislation was brought in, a competitive DSL-based broadband market is virtually nowhere to be seen. Are Europe's authorities merely paying lip service to the idea of the 'networked-economy' because it's fashionable or are they seriously committed?

Unfortunately, for all the EU solidarity shown by leaders of its Member States, national interests always come first. So, while each may enthuse about the advantages of a stronger European trading block (to a large degree built on a comprehensive communications infrastructure), none is prepared to put the interests of the EU above their own country's.

A survey of ECTA members by telecoms consulting firm Atlantic - ACM in October 2001, revealed that almost 60 per cent believed that regulatory decisions should be made by the European Commission 'in order to promote growth in the European telecoms sector.' While, it must be said that the majority of the respondents considered themselves pan European operators - suggesting that they would prefer to deal with one regulatory body with a European reach and standard procedures across borders - the fact that they did is telling in itself. Telecoms is increasingly an international business.

Moreover, the survey also indicated that 48.9 per cent believed that NRAs were not independent enough from the government or the national incumbent; 34 per cent believed they were ineffectual or unwilling to use their power; and 17 per cent believed that NRAs have inadequate power.

Yet, for all the talk of ineffectual regulators and obstructive incumbents, the root cause of all the fuss could - whisper it quietly - a lack of demand for broadband access. The simple fact is that there are millions of people across Europe who have never heard of broadband and would not know one end of a high-speed pipe from the other.
This is the problem facing DSL service providers - whether incumbent or new entrant - and communications authorities alike. There is little incentive to roll out expensive DSL networks unless the operators can be sure demand exists. Broadband demand, however, remains a moot point.

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Miopia

Of course, one danger to incumbent operators of not rolling out broadband access solutions is that other companies will. Those service providers capable include the cable, fixed wireless and satellite communities. Surely, they see 'incumbent apathy' as a great opportunity?

Unfortunately, while cable operators might like to offer broadband where incumbents fail to, many are constrained by the limited reach of their networks into business districts and are already too heavily indebted to capitalise on the opportunity. And fixed wireless broadband technology has so far failed to fire the imagination of the business sector - despite a compelling business case.

For satellite operators, however, Europe's massively underpenetrated broadband market is wide open. Furthermore, unlike other providers of broadband services, the cost of connecting each new customer to the network remains the same whether they are one end of the country or the other.

One such company that believes it can exploit the lack of broadband access is Aramiska, which is launching its new service across Europe from March 2002. The company believes that there are about eight million small and medium-sized companies without access to broadband services.

"Businesses are increasingly demanding high-speed, always-on Internet access, particularly with Internet services and e-mail now playing such a key role at the heart of all businesses - from SMEs right through to major corporations,' says Aramiska's CEO, Philippe Bodart.

So what conclusions will the EU's leaders have reached concerning 'broadband Europe' post Lisbon? Probably that the best way forward is indeed for a centralised European communications regulator; that incumbent ownership of local loops is incompatible with a competitive local access market; that national governments should make cheap capital available for all new DSL entrants; and that all national DSL providers contribute to that country's universal service fund.
Well, we can all dream.

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