JUNE 26, 2008. Research released this week by European telecom research and analysis firm WIK indicates that "only incumbent operators, with their extensive infrastructure and customer bases, can profitably roll out high-speed FTTH"

According to WEK, this raises the possibility that incumbents could once again increase their market share and re-create the monopoly they once enjoyed, reversing the trend towards more competition in telecommunications. Telstra has already been doing this in Australia, by rolling either FTTN or FTTH into new greenfield developments, effectively enliminating their competitors from gaining access to the ULL.

The research, which was commissioned by the pro-competition European Competitive Telecommunications Association (ECTA), covers Germany, France, Spain, Italy, Portugal, and Sweden. It combines results from WIK's research with independent research carried out for regulators, governments and the OECD in other countries, which reaches a similar conclusion. WIK says "its study demonstrates that, because of substantial economies of scale, replication of fiber access lines for high-speed services is not economically viable on any widespread basis."

The research indicates that it is significantly more cost-effective for incumbents to roll out fiber networks than it is for entrant operators to do so. Incumbents can save up to 30% of their investment compared to standalone operators. The three key reasons for this conclusion are that incumbents already own ducts on a nationwide basis; they can make substantial efficiency savings compared with their current network structure; and they already have the number of required subscribers that would pay for the investments simply by switching customers from their existing lines. In some of the countries examined, significant viability was found for incumbents to roll out next-generation access networks even with a relatively conservative return on capital of around 10%, which is commensurate with returns made on today's regulated copper access networks.


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