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Telco Boss Wants Lighter Regulatory Touch (interview)

Ljubljana, 21 December (STA) - Ivica Kranjcevic, the boss of telecoms incumbent Telekom Slovenije, has warned against excessive regulation as the telecoms market regulator, the Agency for Post and Electronic Communication, gets ready to unveil regulatory measures for broadband internet access.

The market regulator is putting the finishing touches on the analysis of wholesale network infrastructure access (including shared or fully unbundled access) and wholesale broadband access, which will form the basis for regulatory measures imposed on operators with significant market power.

Kranjcevic said in an interview for the STA that Telekom was unhappy with the proposed measures. "We miss a serious market analysis that should have been carried out before the regulator has proposed measures," he said, pointing to the lack of an analysis of the impact of regulation on development.

Moreover, Telekom faces regulatory measures not only for its copper-wire network, but also for the fibre-optic network, where the regulator plans to demand the unbundling of the local loop in order to let smaller providers lease the network.

"We believe this is excessive regulation for this degree of development of the fibre-optic network," Kranjcevic said, pointing to European Commission recommendations that regulators should weigh between promoting competition and protecting investment.

"In our case the regulator opted only for the promotion of competition, but it has done nothing to protect the investment in the fibre-optic network."

Kranjcevic pointed out that Telekom has fierce competition in urban areas, where T2 has been building its own fibre-optic network. These areas are also covered by mobile providers with their wireless broadband networks.

"We think that in urban areas, where infrastructure competition is present and our market share is significantly lower than in rural areas (35% in urban areas and 60% in the countryside), there is no need for regulation."

Considering that T2's fibre-optic network is bigger than Telekom's, Kranjcevic suggested that all networks should be opened to competition. "What also bothers us is that regulation does not include cable providers, which are currently the most successful in terms of growth but are not regulated."

Asked if the proposed regulatory measures could in effect stop investment in infrastructure, Kranjcevic said that price wars in the past had kept wholesale prices low, which renders it uneconomical to build fibre-optics in rural areas.

One solution would be to cover rural areas with wireless UMTS 900 and next-generation LTE technology, "but in order to do that the government needs to release radio spectrum".

The Telekom group plans to earmark EUR 60m for investment next year, "but we are not planning any major investments in fibre-optics due to this unclear situation regarding fixed access regulation."

Fixed-access investment will focus on upgrading the copper-wire network, building fibre-to-the-home (FTTH) in new buildings and shortening the copper loop (its length is vital for broadband speeds) pending agreement with other operators.

If the measures proposed by the regulator for fixed access markets are adopted, Telekom expects a shortfall of revenue to the tune of EUR 16m a year plus another EUR 10m in associated costs, Kranjcevic said.

The main project for Telekom next year will be completion of the merger with its mobile arm, Mobitel, due in mid-2011. When this is completed, the merged company will attempt to expand to new services, including cloud computing, and advertising technology in new media, according to Kranjcevic.

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