By Max Colchester and Frances Robinson Of DOW JONES NEWSWIRES BRUSSELS -(Dow Jones)- Three of Europe's leading telecommunications chief executives met Wednesday with Neelie Kroes, the European Union's digital agenda commissioner, to present a raft of proposals aimed at boosting investment in Europe's ultra-fast broadband network. The EU Commission wants broadband connections of 30 megabits a second to be available to all 500 million EU residents by 2020. However, many major operators have been reluctant to shoulder the risk and cost of building such a huge network without a guaranteed return on investment. The proposals, which follows a three-month consultation with more than 40 businesses, is broadly focused on the policies that regulators should put in place to incentivize the construction of such a network. Key to this is allowing telecom operators the freedom to build up scale with cross-border deals and to vary the fees they charge online companies to pipe content across their networks, according to the report submitted by the chief executives of Alcatel-Lucent SA (ALU.FR), Vivendi SA (VIV.FR) and Deutsche Telekom AG (DTE.XE). "Europe needs healthy companies willing and capable to invest," their report stated. "Players who add value should be stimulated by the right incentives." The report also calls for European-wide regulation which allows for flexibility on a local level as well as a co-investment model that encourages operators to team up to build out networks in less profitable areas. Kroes has long stressed the importance of the role that Europe's telecommunications groups will play in rolling out a superfast broadband network across the continent. The investment, which Kroes estimates at around EUR300 billion, will be vital to boost growth in the continent's sagging economies. The Internet economy is expected to grow to EUR800 billion, or 5.8% of Europe's gross domestic product by 2014, according to the EU Commission. European operators, however, already complain about the trials of doing business in a market which they claim is over-regulated and ultra-competitive, and analysts say they are reluctant to take on the cost and risks of building out extensive broadband networks. In 2007 the Commission chastised the German regulator for granting Deutsche Telekom a regulatory holiday for its dominant position in the German broadband market, in part to allow it to recoup the cost of its investment in fiber. The European Telecommunications Network Operators, the industry body for 40 companies from 35 European countries said it is of "key importance for public authorities to improve general conditions for [new fiber network] deployment by eliminating barriers to investment and taking measures to stimulate demand and reduce roll out costs." But Tom Ruhan, chairman of the European Competitive Telecommunications Association said, "Regulatory holidays must end now otherwise Europe will lag behind other regions in the take up of new networks." While the take-up of fixed broadband is still increasing, the growth rate in 2010 was the lowest since 2002, the commission said. Close to 40% of households still have no broadband connection, according to the Commission. -By Max Colchester and Frances Robinson, Dow Jones Newswires; +322 741 1486; frances.robinson@dowjones.com
