Global Economics

EU Seeks Higher Broadband Penetration


The European Commission says the regulatory model is starting to pay off, but further liberalization is needed so consumers can benefit from a range of choices

Northern Europe is a world leader in broadband internet deployment, with Denmark, Finland, Sweden and the Netherlands all achieving penetration rates of over 30 percent by the end of 2007, according to European Commission figures.

The UK, Belgium, Luxembourg and France, are hot on the top four's heels, each of which have penetration rates above those of the US or Japan.

Information society commissioner Viviane Reding was proud of the advances in broadband adoption in much of the EU, highlighted in the commission's 13th Progress Report on the Single Telecoms Market released on Wednesday (19 March).

"The European regulatory model is designed to increase competition in the telecoms market and this certainly is starting to pay off," said Ms Reding.

"However, the job is not yet done," she warned.

At the bottom of the league table of broadband penetration in Europe sit Poland (8.4 percent) and Bulgaria (7.6 percent).

Incumbent operators dominate

The commissioner worries that incumbent telcos—the former public telecommunications services such as British Telecom (now BT) and France Telecom—still dominate the telecoms market.

Current operators hold more than 46 percent of broadband lines across Europe, and in seven member states control more than 60 percent of broadband connections, reads the press release announcing the figures. Incumbents still provide fixed telephony—landlines—to some 87 percent of customers in the EU. In 12 countries, this figure rises to 95 percent.

In response, the commissioner called for still further liberalisation of the telecoms market.

"[The figures] show that we still lack an attractive single market for businesses and services of European dimensions, so we must intensify our efforts to reduce the regulatory borders in Europe."

"Only by opening up the single market for business will Europe become competitive and will consumers benefit from a wide choice of rich and affordable services."

Reform of EU telecoms rules

Ms Reding believes that this competition will only come about via the separation of networks from supply activities.

In November last year, the European Commission proposed a reform of EU telecoms rules that would see such a separation. The proposals are currently being discussed by the parliament and council.

Not everyone agrees with the commissioner, however. The incumbents argue that only large firms such as themselves are capable of the long-term planning for substantial structural innovation and are opposed to such a break-up.

The director of the European Telecommunications Network Operators' Association—the trade association of the incumbent operators—argued this week that Europe lags behind the US in the rolling out of fibre-based broadband networks, where access regulation is less strict.

"The real challenge that now needs to be tackled is to foster infrastructure-based competition and encourage the deployment of high-speed access networks," said Michael Bartholomew, the trade group's director.

"Functional separation is not the right answer to encourage this risky investment."

While UNI Telecom, the trade union representing telecommunications workers worldwide, goes further, and says that there has been too much focus on competition and less on working conditions and quality of service.

They argue that while privatisation and deregulation may have resulted in lower prices for consumers, the focus on liberalisation has come at the cost of a lowering of living standards for telecoms workers and a deterioration of service.

The organisation argues that liberalisation led to over-investment and over-capacity and the collapse of a number of operators. The trade union also highlights the reluctance of some telcos to provide new, advanced services to poor or rural areas or those with high densities of elderly citizens on the one hand, and the proliferation of directory enquiry services on the other.

The European telecoms sector amounts to some €300 billion a year, or two percent of GDP, growing 1.9 percent last year.

Mobile telephony dominates the sector, with revenues worth €137 billion last year, up 3.8 percent on 2006. Mobile penetration across Europe is now 112 percent, with many citizens having two or more subscriptions.

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