Romania moots world’s most unpopular muni-fibre network

Posted by Lucy Berridge Wednesday, November 19th, 2008

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Like the gigabit granny, municipal fibre networks are one of the few human interest stories in the telecoms world. These super-fast broadband networks are often funded by local governments with utopian aims, and some have proved so popular that as many as 90% of residents within their coverage area have signed up for their services. It is surprising then that Bucharest’s proposed muni-fibre project NetCity, is causing such controversy.

NetCity resulted from a decision by the Bucharest General Council that the capital’s latticework of aerial cabling should be put underground by May 2008. The majority of broadband providers in the capital, from large cable operators to outfits with just a few thousand subscribers, use aerial cabling, either slung from poles or from rooftop to rooftop.

Many providers bring fibre to the building, and then connect their customers with an Ethernet connection within the home. As a result, Romanians have a large choice of broadband providers offering Internet packages with download speeds of up to 50Mbps or 100Mbps, starting from just RON25 (US$8.60) a month for Internet access and telephony. It is small wonder then, that Ethernet is the technology of choice in Romania.

NetCity is to be built by IT company UTI Systems on behalf of Bucharest’s City Hall. Once the open-access network is operational, telecoms operators will rebuild their networks underground, either by installing their own cabling in the ducts or by leasing fibres.

In many markets, alternative operators welcome the opportunity to use an open-access network operated by an independent third-party. The rub with NetCity is that it is not so much open access, as enforced access. Again unusually, the project will not help the alternative operators wrest share from a dominant incumbent: Romania’s Romtelecom had a broadband market share of just 18.3% at the end of June 2008.

Insiders claim that the project may in fact reduce competition in the capital. Some operators will be unwilling to use a network they do not own while others, primarily the smaller Ethernet providers, are unlikely to be able to afford the rent. The European Commission’s Information Society commissioner Viviane Reding has expressed concerns about NetCity, saying municipalities must not intervene in any way which would distort broadband competition.

NetCity could be a great opportunity for operators to overhaul their networks. They say they are not opposed to ridding the city of aerial cabling but are deeply concerned that they have still been given no commercial information about the project. .

After the Nov. 30 general election, the cable association the ACC will lobby for the creation of a workable schedule for the transition from aerial cabling to the underground network. This must include a time frame that enables interested parties to asses the full economic impact of NetCity on their services.

At the moment operators claim they cannot even put together a business case for rebuilding their networks because NetCity has not released any information about the project. Construction had not even begun by this month, more than a year since the initial rollout plans were published and less than 18 months before the new May 2010 deadline for having cables underground.

City Hall has not yet published a map of the proposed routes or the commercial conditions. Operators say they need to know not only what the terms of access will be, but also for how long they can be guaranteed. They fear that successive City Hall governments will seek to raise prices and that this could happen fairly frequently, as local elections take place every four years.

Once operators have the commercial information from City Hall they will be able to calculate the economic effect of the project on their businesses. Equally important, they will be able to inform their customers of any tariff changes. Given that many Romanians are now used to low-priced, high speed offers, a dramatic increase in tariffs could create a public backlash against NetCity, and perhaps calls for local government elections, say insiders.

For its part, NetCity is quoted in a local press article accusing the ACC of acting as a mouthpiece for the city’s dominant cable and Ethernet providers UPC and RCS&RDS, and taking little account of other operators’ views. Given these operators would stand to gain from the demise of smaller rivals it would seem the ACC’s concerns are a little more altruistic – though ensuring the future of two of its larger member companies is obviously important.

We wanted to put operators’ criticisms to NetCity. Apart from conceding that they had not completed a pilot section of the network, they showed the same worrying lack of transparency that the ACC has highlighted: they refused to speak to us.