The penny drops –slowly.

I’m delighted to see that Neelie Kroes, EU Commissioner for the Digital Agenda, has begun to pick up a few home truths about the infrastructure investment process.  She has, for some time, been exhorting Europe’s telecom companies to get their act together on investment in next-generation, ‘superfast’, broadband networks but the industry has been muttering unhappily about the various practical difficulties.  Not least of these is the fact that the financial markets are rather daunted by the investment challenge: shares of industry leading players such as Telefonica and Deutsche Telekom are at 10-year lows. Investors are therefore looking for ways to reduce the risk inherent in the superfast project, mitigate costs or improve their access to capital.  We’ve already seen mergers and asset-sharing deals emerge in the UK mobile sector and similar consolidations seem likely in mainland Europe.  Slightly surprisingly, the EU Commissioner recognises this as a positive market response: 

"Having a few pan-European operators that are strong in the cross-border market would not necessarily be bad for competition," said Kroes, adding that protecting consumers was about more than just ensuring a given number of operators in each country…It can make sense ... and be good for investment and innovation."

At the same time, however, the EU needs to decide quickly on how it will regulate access prices – particularly for legacy networks – in the transition to superfast ubiquity.  Kroes has said that she wants “to give economically sound principles to countries' regulators to help them set regulated copper prices, and we are identifying the most appropriate costing methodologies."   But there is a real fear that the Commission might shift the goalposts in a way that undermines investment decisions.  As one telecoms analyst put it:

"You cannot ask pension funds to put money into something that has an eight-year payback with no guarantee that the rules won't change in a way that destroys any return,"

The broader lesson for Kroes is that her pro-consumer agenda throws up some conflicting objectives.  As I’ve noted before, the imperative for network investment is bound to require some compromises in the perfect competition model.