europe - incumbents operators are pushing up wholesale prices ahead of changes to the legal framework

[new york times] The price of broadband and phone services in Europe is poised to rise as the Continent’s big operators win large rate increases from their national regulators before the implementation of a new law that gives the European Commission more influence over setting of rates.

In Germany, Italy and Spain, the former monopolies, Deutsche Telekom, Telecom Italia and Telefónica, have sought increases of as much as 25 percent over three years in the fees they charge other operators to rent access to their land line networks.

The fees, called wholesale access charges, average €6.67, or $9.63, a customer a month in Europe, according to a survey by Cullen International, a research group in Brussels. They can reach more than €10 in countries like Germany, where wholesale charges are typically passed on to consumers through higher retail prices.

Smaller operators have complained that the increases, all sought before May 25, when the European Commission gains new power to challenge national rate decisions, will further limit competition in these markets. Smaller operators typically lease part of the market leader’s land line network to deliver nationwide service.

Larger operators say the increases are needed to reflect their operating costs, and to prepare for the transition to faster fiber optic networks, which they have started building to replace the copper-based networks that make up the bulk of the European telecommunications grid.

“The net effect of these increases has been to preserve the dominance of the former monopolies,” said Vicky Hanley-Emilsson, a policy adviser with the European Competitive Telecommunications Association, a group based in Brussels that represents smaller operators.

The last-minute increases are part of a broader debate over how much Europe’s telecommunications operators will be able to charge rivals for access to new, super-fast fiber optic networks. Big operators are urging the European Commission to set the fees at a level that will ensure the profitability of the newer networks.

Brian Williamson, the director of Plum Consulting, a London firm hired by the European Telecommunications Network Operators’ Association, or ETNO, which represents Europe’s biggest operators, said operators were concerned that new pricing rules being devised in Brussels could make the new networks commercially unviable and slow their construction.

“It might be that the regulation won’t prevent any investment, but there is a question about how far the private sector will go, and that depends on the ultimate regulation and the nature of investment put in place,” Mr. Williamson said.

A slow pace of investment would hinder the European Commission’s goal of bringing broadband service with download speeds of at least 30 megabits a second to all European Union residents by 2020. Neelie Kroes, the E.U. commissioner responsible for telecommunications, is working on a plan to set fees that encourage investment while protecting small rivals. A key part of the discussion is the commission’s policy on access charges for the old copper networks during the upgrade to fiber, which is expected to take several years. Large operators say access prices to the older networks should not be aggressively lowered, or consumers will have no incentive to pay for faster fiber services.

“Driving down copper prices would discourage investment, firstly, by encouraging customers to stay on copper,” said Luigi Gambardella, the chairman of ETNO, adding that it would also have hurt fiber by distorting retail price levels for ultra-fast broadband products.

Smaller operators say the fees for copper networks, whose investment costs were recouped decades ago, remain artificially high, and recent rate increases will only give big operators less incentive to build new networks.

The Spanish regulator is proposing to raise wholesale access charges to Telefónica’s grid by 7 percent, to €8.32 a month. Carmen González, the director of a group representing small Spanish operators, said that some of her members were worried that the increase would squeeze them out of the market.

In Italy, Fastweb, a broadband operator owned by Swisscom, estimates that the Italian regulator’s decision last October to grant a 25 percent increase in access charges to Telecom Italia over the next three years would cost Fastweb €12 million a year.

E.U. Telecommunications Operators Seek to Rush Through Price Rises