Wireless Connectivity

Broadband solutions are in high demand throughout the developed world, but higher prices can deter smaller front-end providers, while lower prices hurt the telecom. BT (News - Alert), a middleman provider of broadband solutions for the European Union, was under the pricing gun. Now, the provider will not be forced to lower its prices as some had expected.

The process started last October when the European Commission considered a market intervention, according to this ZDNet report, which would result in the EC fixing the price of copper broadband solutions services to a more “affordable” level. But this past week the commission changed its tune with commissioner, Neelie Kroes announcing that effort would no longer be pursued.

Smaller front-end providers had complained to the European Commission that prices they were paying to utilize regular copper service networks were too high. Since the copper networks have long been paid for, they reasoned that it only made sense to pay less as incumbents no longer needed to cover the cost of their networks.

They called for a rate decrease, citing that lower service fees would spur existing providers to invest more into lucrative fiber options as an alternative source of revenue. BT, however, said that a rate decrease would actually yield the reverse. Lowering prices for copper broadband solutions would only make those offerings more attractive to users. The company argued that fiber costs would be high in comparison and would, therefore, be a harder sell.

The EC also shot down the proposal saying there was no proof that lower prices would lead BT and other existing providers to expand their fiber services. In addition, the commission gave BT free reign in selecting fees for its fiber offerings. The only stipulation is that wholesale providers must demand the same rate for broadband solutions from competitors as they charge their own existing customers.

Kroes said there simply was not enough evidence to indicate that mandated price drops would encourage the development of next-generation access (NGA) services such as fiber. This coupled with the fact that the copper and fiber networks are direct competitors influenced the commission’s decision to jump ship.

To support the EC’s case, Kroes pointed out that the development of fiber was growing in surrounding states whose prices for copper services were similar to offerings in the European Union.

The main factor that will foster the expansion of fiber broadband solutions, according to Kroes, is consumer demand. She believes that, in time, consumers will come to prefer NGA services over copper, which will naturally drive the prices down. At that point, no one will pay full price for copper when they can get access to fiber for a similar fee. 

BT said it was thankful to get some clarity when it comes to abiding regulations. Because the initial outlay for fiber is very costly, the company says that it hopes the European Commission will continue to support regulations that encourage the development of fiber broadband solutions and promotes healthy competition.

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