Recommendations by Key Broadband Players Include Differentiated Internet Services

A proposal by major players in European broadband networks failed to completely win over alternative telecom providers, commercial broadcasters and digital rights activists at a European Commission CEO roundtable in Brussels Wednesday, representatives of those companies said. The 11 recommendations on how to spur investment in broadband, which include a call for differentiated services, were requested by Digital Agenda Commissioner Neelie Kroes and drafted by corporate chiefs drawn from content providers, equipment makers, investors and telecom operators, the EC said. Kroes said after the meeting that while the work produced no consensus, it “certainly helped to build mutual understanding."

Kroes wants the various sectors to agree on how to boost investment in broadband networks to meet EU 2020 digital agenda targets. The principles submitted Wednesday were prepared under the coordination of Alcatel-Lucent, Deutsche Telekom and Vivendi. “Consensus was never a realistic outcome for discussion involving dominant firms and their competitors,” the European Competitive Telecommunications Association (ECTA) said.

The document says digital agenda targets will be met only through sustainable business models and more efficient use of scarce resources. The industry has four layers, it says: Access; transport; service creation and aggregation; and applications and content. Competition on layers two, three and four is becoming global but the more capital-intense layer one is mostly local, it says. Regulations or de facto negotiating power can’t lead to an imbalance where the more capital-intensive players bear the burden, it says.

Europe should support scale and specialization, which could involve cross-border mergers or layer-focused investment, the document says. It calls for one binding European regulatory framework and says Europe should “promote traffic management differentiation” to enable innovation and new services and meet the demand for different quality levels. Business models could be two-sided, based on commercial agreements that respect the principles of openness and non-discrimination, they say.

Fostering innovation and investment is as important as consumer interests, the document says. The market for next-generation access will be differentiated, based on local circumstances, and should allow for co-investment in broadband networks and public funding in cases where the market can’t act, it says. The CEOs also urged the EU to lower investment barriers by promoting measures to spur demand, make investment less risky and cut rollout costs. They called for open and interoperable standards for Internet Protocol-based quality of service interconnection, and for symmetrical open access to civil works and in-house wiring.

Kroes told company officials she drew several messages from the discussion. Among them is uncertainty about the demand for ultra-high-speed services and applications and the future relationship between copper and new networks, she said. The EC also “takes on board the message” that a robust, best-efforts Internet to which everyone has access should be maintained, while players at different levels of the value chain should be free to make commercial deals for new business models, she said. If rules are needed to ensure negotiations are fair, the EC will study the issue once telecom regulators complete their analysis of the net neutrality situation later this year, she said.

Network operators said they back the industry-proposed approach. The recommendations are an “important step forward towards a modern joint industry approach” to sustainable development of an Internet value chain and next-generation access network deployment, said European Telecommunications Network Operators’ Association Board Chairman Luigi Gambardella. ECTA said consensus isn’t likely, but the process uncovered some “interesting insights,” particularly on how to ramp up investment in high-speed fiber networks.

ECTA members believe the best way to increase funding of and take-up of high-speed broadband networks is to avoid expensive duplication of fiber lines and open networks to non-discriminatory competition, it said. The roundtable process shows that many in the financial and investor community support that view, it said. The approach to regulating wholesale telecom charges and the conditions under which legacy networks can be switched off will also play a key role in determining how investment in and use of high-speed broadband proceeds, it said.

But despite clear EC opposition, there is still a “de facto regulatory holiday” for fiber networks in many countries, ECTA Chairman Tom Ruhan said. This hasn’t led to more investment by incumbents or their competitors, he said. It’s time to recognize that in most cases, the market can only support one fiber network alongside any existing cable networks, he said. Regardless of whether the fiber is owned by one operator or several co-investors, the network must be open and the rules clear, he said.

The Association of Commercial Television in Europe accepted that more Internet traffic growth is crucial to secure financing of new networks. However, it said the EC “should consider that not all traffic is equal": pirated materials generate significant traffic which in turn endangers the survival of the stakeholders that fund content at the beginning of the value chain. Concerns about how to justify long-term investment for new pipes is valid, but “so too is the concern that we may end up with pipes devoid of professional, European content,” it said.

French citizens’ advocacy group La Quadrature du Net accused Kroes of backtracking on an earlier “unequivocal statement against commercially motivated anti-Net-neutrality practices.” Kroes seems willing to let big companies control the Internet and its architecture to achieve short-term economic goals at the expense of competition, innovation and online freedoms, it said.

Kroes said she understands that commercial players will try to maximize their own advantages, but “we all need to recognise that we have common interests.” The “sometimes painful ‘catharsis'” of the discussion didn’t result in consensus but it helped build mutual understanding, she said. She promised to examine every proposed principle, document and idea and to take into account all views in any future actions. Other participants included Cisco, Google Europe, Akamai, SonyMusic, News Corp. and Lovefilm (Amazon).