Wednesday, September 24, 2008

BPN 1230 EC consultation on next generation broadband

Now that the fibre broadband projects, with speeds of 100Mb are introduced in several European countries, The European Commission is launching a consultation on the regulatory principles to be applied by EU Member States to Next Generation Access broadband networks (NGA). The EC is doing this at a time , when the first commercialisation of next generation broadband projects is taking place. In the Netherlands for example there are many commercial fibre optic projects in progress or even operational. The Netherlands is in the forefront after many a study for large municipalities were delivered with the message that high speed access to internet was needed for its knowledge industry and economy. If needed the municipalities should take the lead. This caused some problems for some non-profit bodies and commercial companies in setting up projects. With a ruling by the EC on the Amsterdam broadband project, basic rules were established. Non-profit companies like municipalities are allowed to stimulate broadband projects, but are not allowed to invest commercially.

NGA optical fibre-based networks enable bitrates several times higher than those currently available on traditional copper wire networks. NGAs are required to deliver high-definition content (such as high definition television) and interactive applications. The objective of a common regulatory framework for NGA is to foster a consistent treatment of operators in the EU and thereby ensure the necessary regulatory predictability to invest. The Commission is consulting on the basis of a draft Recommendation, addressed to the regulators in the 27 EU Member States and suggesting definitions for harmonized categories of regulated services, access conditions, rates of return and appropriate risk premiums. The public consultation will be open until 14th November 2008. The Commission will then finalise the Recommendation in the light of comments received and formally adopt it in 2009.

The deployment of NGA is indispensable to deliver new broadband services to European consumers. While a number of operators, both incumbents and alternative operators, have launched large-scale rollouts of new broadband infrastructure in a number of Member States, Europe appears to be still lagging behind other economies, notably the United States and Japan.

The basic principle of the Commission's draft Recommendation is that national regulatory authorities should provide access to the networks of dominant operators at the lowest possible level. In particular, they should mandate access to the ducts of the dominant operators allowing competitors to roll out their own fibre. However NGAs should also impose further physical access obligations (access to unlit fibre) beyond access to ducts where ducts are not available or the population density is too low for a sustainable business model. Access to active elements such as "bitstream" shall be maintained provided lower level remedies do not sufficiently address distortions of competition.

The draft Recommendation provides also a common approach to ensure non-discriminatory access, as well as a methodology for calculating a proper rate of return, including a risk premium. The Commission believes that for NGA, rates of return should be derived in the light of the risks associated with this kind of investment, bearing in mind that the nominal pre-tax weighted average cost of capital for fixed and mobile operators has been roughly 8 to 12% in recent years.

In the meantime the Finnish government has approved a proposal to provide all homes and businesses with internet access at 100 Mbps by 2015. The decision is based on proposals from a broadband study conducted by Harri Pursiainen, Permanent Secretary of the Ministry of Transport and Communications. The project aims to have a distance of no more than 2 km from each user to the nearest fibre-optic or cable network.

Blog Posting Number: 1230

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