EU’s potential reversal on broadband not final word on wholesale access

Those arguing against wholesale wireless regulation at the recent CRTC hearing have often pointed to Europe as an example of how mandating infrastructure access can go wrong, and the new head of Europe’s digital strategy acknowledged some of the same problems in a blog post on Friday.

Wireless companies cited various numbers similar to those in a June 2014 report from Ericsson that said LTE adoption will reach 85 per cent in Canada and the United States by 2019 compared with only 30 per cent in Europe.

The gap in network coverage was a result of poor network investment, the carriers argued, as companies are deterred from building the latest and greatest wireless technology because they must then hand over network access to mobile virtual network operators (MVNOs) who resell services and compete for retail customers.

In its filing to the commission, Telus included (subscribers only) a report from NERA Consulting that claimed mandated access for MVNOs has been a major factor in the poor quality of Europe’s wireless networks.

“All of Europe is paying the price for missteps in communications policies,” Telus senior vice-president of regulatory affairs Ted Woodhead told the hearing.

Similar arguments have been made in the lead-up to the next CRTC proceeding, scheduled to begin Nov. 24, which will look at the wholesale wireline market across the country.

Again, it was Telus that invoked the international comparison in its submission to the wholesale broadband hearing, saying that countries that require service providers to lease wholesale access to their networks have lagged behind on broadband development, and fibre-to-the-home deployment in particular.

“By contrast, where competitor access to incumbent facilities has historically been mandated, relatively little FTTP [fibre-to-the-premise] has been deployed to date, particularly by incumbents,” the company said.

Rogers and Shaw echoed similar ideas in their submissions to the broadband proceeding, urging the government to do away with much of the regulations that currently enable third-party Internet service providers access to the last-mile connections to customers.

On Friday, the new digital commissioner for the European Union, Günther Oettinger, said he was looking for “new, fresh ideas and open discussions” to increase investment in broadband across the EU.

He said that in many rural areas across the EU, more than 80 per cent of homes lack a broadband connection.

“Many millions are unable to enjoy the latest digital innovations,” he wrote in the blog post. “This is a digital age. People want to shop, Skype, download music and videos instantly and not have to wait because of a slow internet connection. Fast broadband is crucial for our future prosperity, essential for our economic and employment prospects.”

Compare that with Canada. Although our country’s “Connecting Canadians” plan for rural Internet access has faced criticism for its definition of broadband as well as the differing timelines put out by the CRTC and Industry Canada, the CRTC says it aims to have broadband access available to 95 per cent of Canadians households by the end of 2014.

Rural Internet provider Xplornet pledged in July to have broadband access of 25 Mbps, far higher than the goals set by the government, out to all its customers by 2017 thanks to investments in LTE and satellite technology.

Despite the fact that the European Union is less than half the size of Canada by land mass and far more densely populated, Oettinger’s stated goal is less ambitious — to have a 30 Mbps connections available to every person in the EU by 2020. And even that, he says, will be difficult.

“That is no straightforward task, needing investment of tens of billions of euros,” he said.

Oettinger then goes on to admit something often charged by Canadian telecom companies, what he calls a “taboo” about regulation in the EU. The heretical idea? That sometimes monopoly power should be given to infrastructure builders in order to encourage them to invest.

Yet even after saying he would challenge the taboo, Oettinger couches it in a metaphor, comparing broadband with the energy market.

“In some limited cases, for new pipelines, companies can be exempted from the requirement to provide competitors with access to pipelines,” he said. “This is only given if they can convince the EU Commission that without that exemption, the investment would not have been made.”

He admits that broadband is not energy, and that the EU need not suspend wholesale mandated access entirely.

“The needs of a dense city with rich competition may be different to those of an unserved rural area,” he said. “In the first case, consumer choice is the issue; in the second it is having broadband at all. In a village — wouldn’t it be better to have the option of broadband with a longer contract, than not to have broadband at all?”

What the EU needs to do, Oettinger says, is “find the right balance between investment predictability and consumer choice,” language familiar to anyone who has been following the CRTC as it works to find a compromise between encouraging network investment and its stated aim of increasing competition in the marketplace.

Of course, the story of European regulation is not as simple as “wholesale kills investment,” no matter what some infrastructure builders would have you believe. EU policy applies universally across 28 member states with differing levels of technological development, urban/rural population splits and economic concentrations. The difficulties of policy-making at the transnational level, as the EU does, are obviously complex enough that a problem like underinvestment in telecom technology can’t be solved with a simple wave of the hand.

Europe’s challenges in broadband access and LTE adoption are apparent from the statistics, yet their causes are much more intricate and impenetrable. Oettinger’s wish to re-evaluate the policies of mandatory wholesale access may cheer the executives arguing before the CRTC that such measures kill investment, but they should also worry that any changes Oettinger makes could just as easily show that ending wholesale access doesn’t ensure future infrastructure investment.