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Wolfgang Kopf

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Broadband expansion – EU reforms neglect investments in new networks

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An article by Wolfgang Kopf, Senior Vice President for Group Public and Regulatory Affairs.

Wolfgang Kopf

Wolfgang Kopf, Senior Vice President for Group Public and Regulatory Affairs at Deutsche Telekom AG.

  • Industry CEOs warn against broadband expansion being endangered by hesitancy in deregulation
  • Reform debate loses sight of investment goals
  • ZEW study confirms that highly complex regulations and foreseeable difficulties in implementation threaten to significantly hamper investment in new fiber-optic networks

The European Commission, industry and member states all agree that the new EU legal framework should improve the regulatory situation and promote investment in new fiber-optic networks. In a letter, the CEOs of the major European telecommunications companies warn against further delaying necessary deregulation measures and watering them down. They write that, in the current debate, the actual aim of the EU reform – to encourage and facilitate investment in high-speed networks – has faded into the background completely.

Academics from the Zentrum für Europäische Wirtschaftsforschung (Centre for European Economic Research – ZEW) and the Politecnico di Torino have examined the proposals for a new telecoms legal framework and have come to a devastating conclusion: “The high complexity of the planned regulatory measures and the difficulties arising from implementing the regulations are endangering the primary aim of the market reform, which is to foster investment in high-performance communication networks in Europe,” says Wolfgang Briglauer, co-author of the study on behalf of Deutsche Telekom.

On the German market, investment in telecommunications networks has increased continuously in the last few years, particularly thanks to large investments by Deutsche Telekom. This is revealed by the recently published Annual Report by the German Federal Network Agency. Yet expanding the fiber-optic network will require further investment running into the billions in the years ahead. Some 660 billion euros will be needed to upgrade Europe’s telecommunications networks for the gigabit society, according to a study by Boston Consulting. That’s why the industry’s hopes are resting on reform of the European telecoms legal framework, particularly the relaxation of far-reaching regulatory requirements.

However, the existing ideas are disappointing, amounting to very little in real terms. The proposal on promoting investment in new fiber-optic networks largely boils down to a new article on co-investment for very high capacity networks. “The provisions for co-investment proposed in the Code are very restrictive, with the result that many voluntary, market-oriented cooperation models and individual investment projects are excluded from relief,” says Briglauer. The Mannheim-based ZEW economic research institute argues that the legislative proposals will extend regulation even further. Additional regulatory burdens and the lack of clarity in relation to the scope and implementation of new regulations raise considerable doubts about the incentive to invest in high-performance communications networks, according to the study.
How can fiber-optic investments best be promoted? ZEW has a clear answer to this question – complete deregulation of fiber-optic access offers the greatest incentive to invest in high-speed broadband infrastructure, both for established and alternative providers. “That’s the key message from the academic research,” says Carlo Cambini, co-author of the study.
The development of state-of-the-art 5G networks could also suffer from a lack of willingness for reform. Firstly, the development of future 5G networks requires much more legal clarity about conditions for awarding contracts, terms of use and utilization periods for radio frequencies in all EU member states. Secondly, discussions about placing the so far largely deregulated mobile communications markets under the control of price and access regulation are also creating confusion.
A planned economy, regulation and bureaucracy is the wrong way to go about driving forward broadband expansion in Germany and Europe. A more market-led economy for Europe’s telecommunications markets would be welcome. The Telecommunications Council is meeting in Brussels on June 9, where it is to be hoped that the appeal by the European telecommunications CEOs will not fall on deaf ears.

Wolfgang Kopf

Wolfgang Kopf

Senior Vice President for Group Public and Regulatory Affairs at Deutsche Telekom AG

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