May 28, 2018 / 9:54 AM / a month ago

EU agrees new rules to stimulate telecoms investment - sources

BRUSSELS, May 28 (Reuters) - European Union lawmakers and member states have clinched an informal deal on a law that enables incumbent telecoms operators to be deregulated if they co-invest with rivals, several sources told Reuters.

The EU, which wants to help to unlock billions of euros of investment in fibre optic networks to meet rising demand for data services, proposed an overhaul of its 15-year-old telecoms laws two years ago to entice operators to dip their hands in their pockets.

One of the carrots held out to telecoms operators was that of lighter-touch regulation if they co-invested with rivals in new networks.

A deal reached last week and which is still being fine-tuned, holds out the promise of deregulation for incumbent operators that agree with a rival to roll out a new fibre network or to finance it over a long period of time in exchange for certain access rights, according to a draft text seen by Reuters.

Former state monopolies such as Orange, Deutsche Telekom and Telecom Italia have long complained that the current rules forcing them to open up their networks to competitors at regulated prices do not allow them get a decent return on investment.

However, other operators such as Vodafone have decried the provision as a regulatory holiday for the incumbents, because deals in which one operator commits to buy capacity over a long period of time, thereby helping to fund the rollout, do not actually lead to co-ownership of the network.

DRAFT DEAL

“You’re a tenant, not an owner,” one industry source said.

The draft deal defines co-investment models as “co-ownership of network assets or long-term risk sharing through co-financing or through purchase agreements.” The wording could still change as it is being refined.

So-called purchase agreements must entail the acquisition of “specific rights to capacity of a structural character”, and should not consist of simple deals whereby one operator rents capacity from another, the text says.

“If you are trying to finance a risky investment, purchase commitments of a certain type ... can move the cursor in terms of de-risking the investment,” said one person who negotiated the compromise.

The Commission hopes such long-term agreements in which operators don’t have to put up all the money upfront will encourage operators to invest in fibre networks, which can cost between 500 euros ($583) and 800 euros per household, according to an estimate by Goldman Sachs.

The Parliament had initially baulked at the inclusion of purchase agreements as co-investment types, fearing this could harm competition, but gave way when stricter conditions were set on what types of purchase agreements could benefit from softer regulation.

ECTA, which represents alternative telecoms companies such as Fastweb and TalkTalk, has called for the co-investment measures to be scrapped as they could reward dominant market players while harming competition.

The law is expected to be finalised at a meeting between the Commission, European Parliament and member states on June 5. ($1 = 0.8573 euros) (Reporting by Julia Fioretti Editing by David Holmes)

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