EU leaders set to back risk sharing in broadband

By Huw Jones

European Union leaders are set to back risk-sharing pacts among operators to pay the 300 billion euros $411 billion) needed to equip the bloc with high-speed broadband networks.

Industry officials said the move could allow operators to charge higher access fees to competitors that want to use the new networks.

Under current EU rules a dominant telecoms operator must allow competitors to use its network for a fee set out by the regulator.

Deutsche Telekom, France Telecom, Telefonica and Telecom Italia say this system was devised for networks based on traditional copper lines.

Stumping up the huge sums needed to give the EU a high-speed broadband network will be a far riskier and costlier undertaking and that financial risk must be shared, they say.

EU leaders were ending a two-day summit on Friday and a section on telecoms was inserted at the last minute after lobbying by Germany

Pressure from Britain and France ensured the final wording stated that any risk sharing pacts must not threaten competition in the market.

To this end, various cooperative arrangements between investors and access seeking parties to diversify the risk of investment should be permitted, whilst ensuring that the competitive structure of the whole market and the principle of non-discrimination are maintained, the draft conclusions said.

In this context, it invites the Commission to develop a European broadband strategy, by the end of 2009, in close cooperation with stakeholders, the draft summit conclusions said.

The timing of the statement is key.

EU Telecoms Commissioner Viviane Reding has proposed reforms to make the telecoms industry more competitive and cheaper for customers.

Negotiations on their adoption by EU states and the European Parliament are at a delicate stage with a key meeting between the two sides due next week to hammer out a final deal.

Reding did not include the principle of risk sharing in her draft reform but with backing by EU states it will now be included. Reding's spokesman said the draft summit statement reflected the Commission's view there cannot be investment that discriminates between operators or excludes competition.

New entrants, who say they don't have deep pockets to fund new networks, may be concerned but a source close to one of the big operators said the summit statement was a big political message to back their arguments.

With the principle of recognizing that investments are very risky there could be arrangements on what price to sell the new next-generation services, that they can charge more than the at-cost that they charge today, the source said.

An EU diplomat said risk in new projects must be recognized but in the form of a risk premium and not a barrier to new entrants.

(Additional reporting by Julien Toyer, editing by Dan Lalor)

($1 = 0.7302 euro)