The European Commission has moved to accelerate the introduction of real competition to Europe’s local loop communications infrastructure, and issued cost-related pricing guidelines for short-distance leased lines. The EC said its action is prompted by a growing perception that European business is being discouraged from ramping up internet access by high local loop rates, putting the whole EU economy at a disadvantage when compared to the US.
While not mandatory, the latest EC statements make it clear that the Commission wants national regulators to increase the pressure on incumbent operators to either cut local loop prices or face forced opening of their infrastructure to competitors. The guidelines state that national regulators should instruct incumbents and other local loop operators to cap prices, excluding VAT (sales tax) for 5km or shorter links to 80 euros ($81.6) for 64Kbps line, 350 euros ($356.8) for 2Mbps and 2,600 euros ($2,650) for 34Mbps.
Operators that don’t meet the guidelines should be told to explain themselves, the EC said. If quasi-official pressure fails to bring results, the EC said regulators should consider unbundling the local loop to full competition, encouraging the roll out of ADSL and accelerate allocation of spectrum for wireless local lop systems.
While the latest EC position on the local loop sounds like a loud bark, in reality there is little in the way of bite behind it. Most of Europe’s regulators are in any case moving to encourage ADSL and WLL roll out, and the growth of broadband cable services on the continent is adding to pressure on incumbent telcos to cut leased line charges.
Nevertheless, an acceleration of the process would certainly be welcomed by European business. In some European markets, said the EC, leased line charges account for 25% of total telecoms service sales, and can represent as much as 40% of the barrier to entry cost for would be local loop competitors. Any decline in these figures would be good news for Europe plc.
