Steady as she goes…

‘Poked with a twig’ was just one of several, relatively benign metaphors that the Lex column in last week’s FT used to describe the reaction of Europe’s telecom incumbents to Neelie Kroes’ decision not to impose price reductions on access to their legacy, copper networks.  Predictably, that view was not shared by the competitor fraternity: a swift response from ECTA argued that “the direction…will harm the competitive conditions of the broadband markets and will eventually harm consumer interests without fostering investments”.  But the incumbents’ feeling of this coming as a ‘welcome respite’ was based not just on the favourable pricing decision but also from its durability: Kroes said she wanted the regulatory guidance ‘to apply at least until 2020’. 

The idea of regulatory stability is routinely trotted out as a precursor of private sector investment but Kroes was right to give this factor renewed prominence in her policy statement:  From another perspective, Sean Williams, Group Strategy Director of BT, provided a very tangible illustration of the investor’s fear of instability in the evidence he gave to the House of Lords Select Committee on superfast broadband: 

“One of the most supportive things that Ofcom could do is make a long-term commitment to its regulatory policy towards fibre networks. At the time when we made our fibre investments, we had a conversation with Ofcom about how it was seeking to regulate this risk investment that we were making. It made some very supportive remarks but it did not feel the need to regulate this investment. In fact, it was so uncertain that it would be very difficult to regulate, and we completely agree with that. But every three years it has to make that choice again. That is a very difficult environment for us to make a 20-year-view investment with a 12-year payback if the regulatory regime can change every three years…” 

He has a point!