The European Commission has asked Italy's telecommunications regulator AGCOM to delay its approval of a planned Telecom Italia (News - Alert) wholesale local loop unbundling fee increase.

The EU says it wants a delay, to verify the underlying network cost data, before approving the price increases.

According to AGCOM the proposed price increase aims to better reflect actual costs of operating the network. 


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That stance reflects the ongoing EU effort to reduce wholesale costs throughout the EU.

The European Commission also recently suspended a wholesale broadband pricing proposal from Austria's telecoms regulator TKK. In that case, the EU officials argued that the new prices would block investment in broadband.

"TKK's proposal must give national and multinational operators the right incentive to replace the old legacy copper network with modern technology, and provide stability and predictability," said the Commission's telecoms chief, Neelie Kroes.

But that’s the problem regulators now face, in a nutshell. On one hand, European regulators have focused more on aggressive wholesale access and rates as a way of stimulating competition.

They arguably have succeeded. But on the other hand, the very rules that offer the network facilities owners a limited financial return are the same rules that stifle investment in next generation network facilities.

Beyond the issue of mandatory wholesale access at rates so low they worry the companies that would be making the investments, the actual size of the payback from any fixed network next generation investment is quite uncertain. Investors dislike uncertainty, placing one more obstacle in the path of further investment, even to build faster fiber-reinforced networks.

By some estimates, it could cost EUR 200 billion to EUR 250 billion just to upgrade about half of EU homes for 100 Mbps access. Upgrading mobile networks to support Long Term Evolution will cost some EUR 50 billion to EUR 70 billion.

There are some certainties. Since about 2008, EU fixed network service provider revenues have declined about three percent per year. Mobile prices have dropped about eight percent a year since 2008.

Still, potential replacements for those lost core revenues remain speculative.