Broadband deal for internet suffers “big, big problems”

Date: 29/11/01

By Peter Chapman

A RUSHED-through deal to force open "the last mile" of telecom networks in a bid to spur broadband internet access has been a huge flop, the MEP in charge of pushing the rules through the European Parliament admitted this week.

MEPs responded to a call to arms from telecoms chief Erkki Liikanen and member states to rush through a regulation in record time invoking the new "Amsterdam procedure", which does away with the need for two readings of legislation in Parliament. The move was meant to be a linchpin of the Lisbon "dot com" summit's promise to make Europe the most innovative economy in the world by the end of the decade.

The new regulation stated that old monopoly operators had to "unbundle their local loops" - meaning they must allow other companies access to the basic copper wire that goes the "last mile" direct to a customers' office or home, without the need for digging up roads.

The move to open up the networks - built on the strength of government subsidies and monopoly profits - was at a stroke expected to make it profitable for swathes of competitors to offer both

e-commerce firms and domestic customers the lightning-fast digital subscriber lines (DSL) services that turbo-charge the copper network.

But Nick Clegg, the UK Liberal MEP in charge of shepherding the regulation through Parliament, said since it was rubber-stamped there have been "big, big problems".

"It's a real disappointment. We pinned a lot of hopes on it," said Clegg, a former member of ex-trade Commissioner Sir Leon Brittan's cabinet.

"What is undeniably true is that the increased access to broadband that local loop unbundling was meant to bring about has still not happened. The jury is still out. There are some big, big problems that are nothing to do with the regulation that prevent the take-up of unbundling.

"The first is the collapse of new entrants. Secondly, demand for broadband has been a bit flatter than we thought.

"Thirdly, you have the technical difficulty of forcing the operators to unbundle."

A report by the European Competitive Telecommunications Association (ECTA) - a group of new entrants to telecoms markets - shows that DSL penetration is running at just 1 of the total lines, although incumbents are stepping up their efforts to get customers to upgrade.

Of the 2.7 million DSL lines which are in operation, only 3 are offered by new entrants, with the rest supplied by the old monopoly operators. ECTA director John Dickie said many of the EU's big national players such as Deutsche Telekom were abusing their positions to keep competitors out while regulators had sat back.

The only way companies could offer DSL was to pay for a fully unbundled local loop from Deutsche Telekom - even if they only wanted a small part of the network to offer DSL, leaving the incumbent to continue to offer voice calls.

Worse, said Dickie, is that the price was "very similar to the retail price" Deutsche Telekom is charging retail customers for DSL services - leaving rivals with very little chance to make money. In the meantime, Telekom was "vigorously rolling-out DSL".

Critics such as AOL said the unbundling law was never going to be the boon for households that it was touted to be. Even competitively priced DSL access is likely in the short term at least to be more expensive than many customers would be willing to pay.

Instead, critics say the EU should step up efforts to boost unmetered access to slower "narrow-band" services, in which dial-up costs are removed and customers pay a flat-rate subscription each month.

Flat rate would give more customers a taste for the internet before they upgrade to broadband - in turn boosting the quantity and quality of online content.

The move would be achieved by encouraging telecom operators to modify the way it charges customers dialling-up their local internet service provider.

But the failure of unbundling has been a huge setback for businesses hoping to set up business-to-business or e-commerce services.

The lack of progress on unbundling adds to the depressing picture for all broadband services - not just DSL - in Europe, depicted by a report published by the Paris-based OECD last month

A rushed-through deal to force open 'the last mile' of telecom networks in a bid to spur broadband internet access has been a huge flop, the MEP in charge has admitted. Article forms part of a special report on telecoms.