European FTTx regulatory uncertainty may be clearing
by Kurt Ruderman
Efforts by the European Commission (EC) to put in place a new telecommunications framework that focuses on broadband fiber access technologies have raised optimism at the FTTH Council Europe, whose members say clear, coherent regulation is needed to spur massive FTTH deployments.
After some false starts, the European Commission is on the way to bringing a degree of pan–European regulatory certainty that should spur FTTH deployments. But obstacles remain.
“This is a major step,” said Joeri M. Van Bogaert, president of the FTTH Council Europe. “A major change is that FTTH and FTTC have been separated and a graduated set of remedies have been made.”
Today, European Union (EU) regulations cover traditional copper telecom networks and do not address issues arising from fiber–based next–generation access (NGA) networks. The opening of telecom networks, different market conditions, and the advent of a variety of FTTx technologies have created a very diverse regulatory picture in the EU. In northern Europe, where municipally owned companies are building FTTx projects, governments tend to favor service–based competition in which competing service providers all use the same network. In France, Spain, Portugal, and Italy, alternative carriers are driving infrastructure–based FTTx competition, which is favored by the FTTH Council Europe.
“If you look at Europe at this moment, regulators are looking at regulations differently,” Van Bogaert said during an interview in November. “This is a problem for suppliers from outside Europe, so centralized regulations would help. What we want to see is one coherent European regulation. This will help investment and investors to build pan–European projects. For the moment there are a number of investments that have been postponed because of regulatory uncertainty.”
The EC intends to submit recommendations this year to enable the EU's 27 member–states to implement consistent legal frameworks that maximize benefits and minimize costs related to the regulation of NGAs at a European level. The commission's goal is to have a first proposal in place before France's presidential term ends in 2009.
Van Bogaert said that “most national regulatory authorities [NRAs] in Europe would like to remain independent. They would like to take EU recommendations and tailor them. In many countries, incumbents are still partly owned by the government. It will be a challenge for the commission to get all NRAs in line.”
France, Portugal, and Spain have already established a number of rules that are in line with the proposed EC fiber recommendations.
The EU reform process began in 2007. On November 13 of that year, the EC proposed to the European Parliament and the Council of Telecommunications Ministers reforms of the EU telecom rules (in place since 2003) to reinforce competition and investment and to create a single EU telecom market. Parliament began debating the package in early September 2008, and the debate in the European Parliament's plenary with its 785 members led to a vote on the commission's entire EU telecom reform proposals in first reading on September 23.
The Parliament vote shot down the EC's proposal for creating a powerful regulator called the European Telecom Market Authority (EMTA), which had been spearheaded by EU Telecommunications Commissioner Viviane Reding. The proposed EMTA has since been transformed into a less powerful institution based on the existing European Regulators Group, which comprises the regulators from the 27 EU member–states. However, the EC has kept Reding's proposal to terminate regulations in certain markets where competition is now robust, and her proposal for functional separation of network and service businesses to help increase competition. The separation proposal has met opposition from some of Europe's leading incumbents, including TelefÃ³nica, Deutsche Telekom, and France Telecom.
However, functional separation, which would not require divestiture of assets, has already been implemented in the UK. Several other EU countries, including Sweden, have taken steps toward implementation.
The Parliament approved several of the EC's fiber–specific proposals and recommendations. Following the vote, the EC launched a public consultation that ended November 14. The commission has since been reviewing comments and meeting with industry groups to fine–tune the proposals.
The proposals stress the need for national regulators to evaluate market share, or Significant Market Power (SMP), and geographic variations when analyzing scenarios for NGA. An operator is presumed to have SMP if it has more than 25% of a telecommunications market in the geographic area in which it is allowed to operate.
The EC is seeking to improve the rules for facility sharing by introducing in the EU's regulatory framework provisions that would allow national regulators to impose access to buildings, ducts, manholes, and street cabinets to ensure a level playing field. The EC says that in an FTTH context, this objective can in principle be achieved subject to economies of density and scale as long as equivalent access is provided by the SMP operator to the relevant passive elements of its legacy network.
The EC says that duplication of infrastructure should be avoided where it is impractical or undesirable, such as in–building wiring.
The EC has identified concentration points as essential elements of the network topology, saying NRAs should seek negotiated agreements between an SMP and alternative operators.
The EC has also addressed fiber upgrades of existing SMP copper access networks. The commission wants to ensure that when SMPs replace copper networks with fiber to the node (FTTN) networks, competitors using those copper networks will have a reasonable transition period to decide how to cope with the changes.
Of all the countries that have introduced new NGA regulations, France is one of the most advanced. On August 4, 2008, France passed the “Law to Modernize the Economy,” a package that includes laws on FTTx networks and building cabling issues. The package coincided with the finalization of a duct offer by France Telecom, which had been required by ARCEP, the French telecom regulator. ARCEP has demanded France Telecom provide access to its civil infrastructure (ducts, manholes, etc.) under transparent and non–discriminatory conditions, and at cost–oriented tariffs.
Under the modernization law, the first FTTH operator to enter and cable a building must open the network to competitors on an equal access basis. Under the law, syndics (companies that manage buildings for apartment owners) cannot oppose the installation of FTTH networks by communications companies. The law also states that the mutualization (network concentration) point will be outside the building. The mutualization point has not yet been defined. ARCEP wants to wait and see what happens over the next year before making a decision.
At the request of the alternative carrier Group Iliad (Free), ARCEP also backed a process whereby the first operator to equip a building would install additional fiber in the last drop on behalf of other operators. The additional fiber would be pre–financed by the second operator.
Despite the regulatory revisions, France's operators say more has to be done. France Telecom CEO Didier Lombard said that his company would miss its 2008 FTTH target of 1 million homes passed because of regulatory delays involving the sharing of FTTH access.
In September, France Telecom and rival SFR signed a limited cooperation agreement for FTTx rollouts. This was followed in December by an agreement among France Telecom/Orange, SFR, and Numericable for fiber sharing. However, Free has not as yet participated in any such agreement, much to the displeasure of France Telecom. The lack of a fiber exchange plan among all operators and opposition from syndics has slowed FTTx deployments in France.
“Response to the Public Consultation on Recommendation on Regulated Access to Next Generation Access Networks (NGA),” FTTH Council Europe
“Commission Raises Serious Doubts about Proposed Spanish Broadband Regulation,” European Commission
“Fiber Rollouts and Sharing of the Last Part,” ARCEP
Kurt Ruderman is European editor at Lightwave.