Revision of the Guidelines on public funding to broadband networks

 [click on this link to contribute]

The objective of this consultation is to gather information from stakeholders on the revised Broadband Guidelines, which lay down how the Commission will apply the EU state aid rules in relation to public support granted for broadband network infrastructure deployment.
To the extent possible, please in particular mention individual paragraphs in our draft if you wish to make specific comments. We would appreciate obtaining documents in an electronic format that will enable the reader to copy & paste text.

Consultation period From 01.06.2012 until 01.09.2012

Reference documents and other, related consultations

• Public consultation and information gathering of 2011
• The Broadband Guidelines
• The list of Commission decisions
• Competition website – telecommunications
• Digital Agenda

EU Commission needs you!!

Commission opens public consultation on how to reduce the cost of rolling out high speed internet

PRESS RELEASE DG INFSO

(27 April 2012) High-speed Internet underpins all sectors of the economy and will be the backbone of the Digital Single Market. For every 10% increase in the broadband penetration the economy grows by 1 to 1.5%. In this context the European Commission is seeking views on how to cut the costs of setting up new networks for high speed internet in the EU. In particular, the Commission wants to explore how to reduce the costs associated with civil engineering, such as the digging up of roads to lay down fibre, and which can account for as much as 80% of the total cost. The Commission believes it could cut the cost of broadband investments by a quarter. Input is sought from all interested public and private parties including telecoms and utility companies for instance, investors, public authorities and consumers.

more…. http://europa.eu/rapid/pressReleasesAction.do?reference=IP/12/434&format=HTML&aged=0&language=EN&guiLanguage=en

Telecoms services improving, but regulatory divergences should be addressed to support further innovation.

 

High speed internet is a lifeline for economic recovery which provides new opportunities to enjoy and create web content, to innovate or to buy, sell and carry out business online The telecoms sector has a key role to play in the race towards a digital EU society, where growth and jobs can be delivered by better and faster on-line activities. The report on the progress of the sector released today as part of the Digital Agenda Scoreboard (see IP/12/614) shows how citizens are enjoying greater choice of services and better prices, as a result of competitive developments. It also shows that operators are faced with new realities as users’ appetite for data, in particular mobile data, keeps growing. The report also identifies a number of areas where more co-ordinated implementation of the telecoms rules is required to support the roll-out of high speed internet. The report issued today outlines a number of key trends and achievements: • Demand for data is exploding: 95% of Europeans have access to a fixed broadband connection, while the use of mobile internet has gone up by 62%. The huge potential growth for data traffic volumes opens up new business opportunities for the telecoms sector and online service providers. Data represents 7.6% of total industry revenues for individuals and households with revenues from mobile data services up almost 10%. • To support consumers’ demand for mobile internet services, a significant amount of radio spectrum was freed up during 2011: Belgium, Lithuania, Slovenia, Greece, Malta, Spain and Portugal opened up the 900 MHz and 1800 MHz bands (“GSM bands”) to new mobile services, while the 800 MHz band was assigned to mobile broadband in Spain, France, Italy, Portugal and Sweden. • Consumers, overall, got better deals for mobile services. The average revenue per user (ARPU) dropped in many Member States with the average EU level decreasing from €244 in 2009 to €221 in 2010. Thanks to progress in implementing the EU rules on termination rates, the fees networks charge other networks for delivering mobile voice calls, mobile termination rates went down to 3.87 cents per minute in 2011 compared to 5.47 cents per minute in 2010. The report also points to area where targeted measures are needed to make the most out of the EU regulatory framework: • Member States need to implement the updated EU telecom rules which were agreed in 2009. To date, four Member States (Belgium, Poland, Portugal and Slovenia) have not yet transposed these rules into their national legislation These rules guarantee more competitive markets for consumers and businesses and give EU customers new rights, such as switching their phone operator in one day without changing the number or being informed without delay when their personal data is stolen online. In terms of implementation, the Commission is particularly concerned about issues like the independence of regulators, consumer protection (in particular over the adequate implementation of EU rules on number portability) but also specific taxes on operators where infringement proceedings are ongoing against Hungary, Spain and France. • There are major variations in the price of broadband access products such as the price alternative operators pay to use incumbents’ networks to provide services to customers where the monthly average wholesale price for access to the ‘local loop’ varies between €5.3 in Poland and Slovakia and €14.4 in Finland. This shows the need to increase regulatory consistency in areas like the costing methodology of broadband access products and non-discriminatory remedies. • Up to 80% of the costs of rolling out high speed broadband networks are related to civil engineering, such as the digging up of roads to lay down fibre. The Commission believes this high percentage calls for harmonised measures to reduce these costs and is envisaging an EU initiative in the beginning of 2013. • Member States are taking divergent approaches on the issue of net neutrality and quality of services which slows down the development of the digital Single Market. Recent analysis from BEREC – the body of European network regulators – shows that at least 20%, and potentially up to half of EU mobile broadband users have contracts that allow their Internet service provider to restrict access to services like VOIP (e.g. Skype) or peer-to-peer file-sharing. This shows the need for co-ordinated action to ensure better consumer information and choice of internet services (see MEMO/12/389). Date: 18/06/2012 Data source: European Commission Click here for more information

The road towards ‘smart Europe’ – Frost & Sullivan

An intelligent and innovative Europe cannot be built without its backbone: next generation broadband access. European policymakers at all levels – regions, states and the EU as a whole – are conscious of this. This awareness has been transformed in various political initiatives, from the EU Digital Agenda to regional initiatives.

However, there is a substantial gap between Europe and other developed economies, such as South Korea and Japan, in terms of the pervasiveness of next generation broadband access. A renewed effort and commitment is required to bridge the divide, but most importantly, to also stimulate economic growth through broadband infrastructures and services.

There are clear challenges to face – deployment costs, demand uncertainty, and regulatory inefficiencies – but the difficult time that Europe is currently facing requires an exceptional effort in order to drive growth. This effort calls for a more synergic collaboration between the private sector and the public sector in order to accelerate the penetration of next generation broadband access, and transform the urban and rural areas of Europe into a single, unified smart continent.

‘ULTRA-FAST BROADBAND’ – POLICY AND PRACTICE’

Overview

Overview

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‘ULTRA-FAST BROADBAND’ – POLICY AND PRACTICE’
21st May 2012 – 9:00-18:30, Sofitel Brussels Europe

Keynote Speech by Neelie Kroes
Vice President and Commissioner for the Digital Agenda, European Commission
plus
TU Delft present the findings and recommendations from their new report

 

Topics include:

• Do we need industrial policy to achieve Digital Agenda targets?  Will the market deliver the Commission’s broadband targets on its own or should policy-makers be more pro-active?  Should we favour fibre-to-the-home or be technology neutral?  Should pricing be used to incentivise investment in NGA? Should policy-makers favour “infrastructure competition” or a “one-network” approach?  Delft University of Technology presents new research and other high-level stakeholders from industry and regulators debate the pros and cons of different approaches.
• Access pricing and non-discrimination: How could proposed new rules from the European Commission on access pricing and non-discrimination affect ultra-fast broadband deployment
• Could entrants win the fibre race?: Under what circumstances can new entrants get ahead and is the business case sustainable?
• Infrastructure competition and technologies: where are the limits? Presentations on the future capabilities of fixed and mobile technologies and case studies on fibre and cable roll-out. Is infrastructure duplication a realistic and desirable objective?
• Enabling fibre roll-out: financing and demand – exchange of views with equity and bond investors and infrastructure funds on factors influencing investment decisions. Are the interests of investors and consumers in conflict or can they be made to coincide?
• Ownership, separation and equivalence: an assessment of outcomes achieved through different models ranging from functional separation in the UK, to “independent” utility fibre investors, to Government as the network owner to co-investment by multiple telcos. 

>> Click here for the full conference programme

Fiber – a good investment for society

Acreo has carried out a feasibility study to evaluate the socio-economic return of FTTH investment in Sweden, on behalf of the Swedish government’s Broadband Council (Bredbandsforum). The study has investigated the fiber-based broadband effects on economic growth, both at a national level and in individual municipalities. The result demonstrates that a fiber investment generates economic gain in less than 3.5 years.

The greatest impact is found for the public sector where the result indicates that communication related costs can be cut by 30-50% thanks to the availability of fiber. The study also shows that the municipalities that have invested in fiber will have a positive economic growth in the form of increased employment and a positive population trend.

“A particularly interesting finding is that the deployment of new fiber-based broadband networks in Sweden has a clear impact on economic growth and population development” says Crister Mattsson Senior Advisor at Acreo. “In order to stimulate local initiatives this needs to be clarified with the local authorities, too often they are not aware of the positive effects of fiber investments.”

Acreo has performed a statistical analysis that links the effects of fiber investments, spread over a four year period, to the specific socio-economic factors. The return of investment was then calculated year by year, up to five years after the investment. The study also estimates the investment needed to connect the remaining households that do not have access to fiber. The analysis is based on data from Statistics Sweden (SCB), Swedish Post and Telecommunications Authority (PTS), meta-analysis, Acreo’s own research in the field, and on extensive interview data where Acreo has conducted both surveys and in-depth interviews with local governments, telecom operators and network owners.

“The actual return is expected to be greater than what is calculated in the study when indirect and induced economic effects are likely to increase over time and also due to effects not currently quantifiable” says Marco Forzati Senior Researcher at Acreo. “Therefore, to be able to calculate the true value of an investment, a more comprehensive method needs to be developed.”

Traditionally, the success of broadband investments is primarily evaluated from a telecom perspective. For society, however, economic growth and the impact on the public sector are more important success factors for the assessment of the investment.

“This feasibility study is the first step to better understand the real social impact of broadband investments in Sweden. It provides a good basis for further discussions in the efforts to spread knowledge of broadband-related issues and its benefits for society” says Patrik Sandgren at the Government Broadband Forum.

For further information please contact:

Crister Mattsson, Senior advisor at Acreo, +46 (0)8-632 77 92; crister.mattsson(at)acreo.se

Marco Forzati, Senior scientist at Acreo, +46 (0)8-632 77 53, marco.forzati(at)acreo.se

Press Contact:

Tove Madsen, Marketing and Communication
+46 (0)8-632 77 86, tove.madsen(at)acreo.se

About Acreo

Acreo is one of Europe’s top research institutes providing breaking edge results within the field of electronics, optics and communication technologies. Turning academic research into commercial products, Acreo offers value-adding technology solutions for growth and competitiveness in industry and society. The types of assignments are ranging from feasibility studies, long term research projects, prototyping and small scale production, to verification and testing. Acreo also supports small and medium sized companies with technology transfer, business networks and financial advice. Acreo is part of Swedish ICT, and has 145 employees located in Kista (headquarter), Norrköping and Hudiksvall, in Sweden.

About Acreo Broadband Technology

Acreo Netlab is active in the field of Broadband Technology; our activities span core networks through access networks to home networks. We address network design, optical transmission and IP protocols, we measure how networks are used and how network performance influence quality of experience of important services such as video and IPTV. We perform technical research and development; we drive standardization and policy issues as well as analyze business models.

How to guarantee profitability of your FTTH network with a comfortable margin?

 

“In order to ensure that the FTTH is deployed in the most efficient manner, a competition for the market could be introduced to choose the most efficient FTTH network operator at the local level.

When this model is applied in France, total investment needed including connection to each accommodation is estimated at €36 billion that is supposed to pay off within 35 years with the same level of profitability as the copper network at 10.4%by ISPs would be at €15.00/line/month excluding tax vs. €9.00/line/month for the copper network. Given geographic averaging, 20 million lines, or 60% of the total, would cost lower than their average price and thus incur a profit of €800 million/year that would compensate the loss arising from the 12 million loss-making lines (see figure 2 below). For ISPs’ consumers, the retail fibre monthly rental charge would then stand between €38 and €39/line/month, equivalent to a 20% price increase compared to the standard broadband over copper monthly rental charge. In return, these consumers would enjoy symmetric internet access at a higher speed of up to 50 times and the possibility to choose any ISP and to have access to any internet service regardless of where they live. “

“The European Commission issued an NGA Recommendation in 2010 that requires regulator to take into account an investment risk premium to allow for an increase in wholesale access price to the new fibre network. Also the European Telecommunications Network Operators’ Association (ETNO) and the European Competitive Telecommunications Associations (ECTA), two emminent trade associations in telecoms, have proposed contradicting measures. While ETNO recommended the same pricing method for both the fibre and copper network, ECTA indicated that access price to copper should be cut substantially to create enough incentive for incumbents to invest in fibre. However if the efficient model presented above had been chosen, these questions would be irrelevant since migration would be automatic for all households, plus profitability of FTTH network would be guaranteed with a comfortable margin.”

Source: http://www.teraconsultants.fr/assets/publications/PDF/From_copper_to_fibre_an_optimal_regulatory_policy.pdf 

In the UK there has been an apparent shift by OFCOM which DOUBLES the time to breakeven for the competitors compared with the incumbent??

read more…. Geo’s exit from NGA leaves questions for Ofcom by Ian Grant

revenue……reduction pushes tenants’ potential break-even period to 20 to 25 years. This is double BT’s expected break-even period for its Infinity fibre to the cabinet programme.

Is this happening in your country? 

Is the competitors’ access to the networks being opened up by the incumbent operators without fear or favour?

Please tell us what you see happening in your region.

 

 

Did you respond to the DG COMP call – here is our response for your comments and feedback.

Thanks to our EBPII expert Gareth Locksley for aggregating and submitting this response to DG COMP

State Aid and Broadband GL Submission Click on Link to read full submission

Specific Comments on DG COMP Questionnaire

The following partial responses draw on the general comments above. 

Question 1.3 The development of the ‘free’ business model and the ‘utility’ model should be considered within the Guidelines.

Question 2.2 The Guidelines should consider the possibility of the application of the utility model to these long lasting and long technology life cycle components of B+NGAB. The resultant lowering of prices would clearly serve the objectives of the Commission and the EU regarding affordable and widespread generalised access to B+NGAB.

Question 3.3 The plans should be backed by significant performance guarantee bonds payable to the local authorities when the plans are unfulfilled.

Question 4.1  Competition in B+NGAB being limited to geographically limited areas [for example two thirds of the UK population live in around 10% of the land mass] does to function in a manner similar to ‘traditional’ markets. There are no incentives to address the entire market. New entrants only need to undercut incumbents in the most attractive markets. Far greater incentives or more active public intervention is required outside these limited areas.

 Question 5.1 There are always difficulties with incumbents and the difficulties rise with the degree and intensity of vertical integration of incumbents.

 Question 5.2 Access to all technological possibilities is required 

Question 5.3 At least 7 years. More realistically an obligation for the entire technology life cycle of the component of B+NGAB.

 Question 5.4 Multiple fibre infrastructures are highly unlikely to materialise in white areas and are improbable in grey areas without state aid. Effective open access to fibre priced on the utility [or even free model] will provide for competition in the provision of service, applications and content.

 Question 5.6 A requirement that the recipient applies a utility [or free] business and pricing model to network infrastructure.

 Question 6.1 NRAs could assist authorities in ensuring the business and pricing model of the response to 5.6.

 Question 8.1 Separation would ease the application of a utility [or free] business and pricing model to network infrastructure. It would also provide opportunities for investors seeking such risks, returns and appropriate asset backing.

 Question 8.2 Public ownership and social enterprises using utility or free models should be allowed for in the Guidelines in white areas where there is a clear market failure. There is also a case for similar arrangements in grey areas, in particular where the incumbent does not transparently price the network infrastructure component of B+NGAB according to its technology life cycle.

 Specific comment on existing Guidelines

Art 51 (g) This exercise does not take into account the technology life cycle of the network infrastructure component of B+NGAB, obliging bidders to replicate the business models of incumbents rather than applying valid alternative models.

EU NEEDED YOUR VOICE !

HAVE YOUR REGION SUBMITTED A RESPONSE TO DG COMPETITION??

You and your Region have the opportunity to influence the Community Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks!

Do you believe the rules should be changed to provide the State Aid and Public Sector financial support needed and guarantee the superspeed infrastructure required across Europe over the next 9 years ?

HOT ISSUES – discuss your views here – gather support – submit your responses to DG COMP.

• Should incumbents be forced to collaborate with the competition?
• Should new suppliers of dark fibre be taxed for every metre installed?
• Should governments and LA’s who fund next generation networks with public money retain ownership or at least a “golden share”.
• Should the 7 Year Rule be dropped?
• Should “White Areas” be defined as < 20Mpbs simultaneous download and upload [Germany]
• Should there be a National Broadband Fund for community intiatives? [USA]

All responses must be with DG COMPETITION before the closing date: 31st August 2011.

* “all stakeholders to submit their views on the basis of the questionnaire. Please in particular mention individual paragraphs in the draft if you wish to make specific comments.”

Questionnaire bg cs da de el en es et fi fr hu it lt lv mt nl pl pt ro sk sl sv (Rich Text Format)

Financing high speed Broadband – what do you think?

Challenge – we seek to engage with you and gather a broad range of opinion from a range of contributors across Europe, in relation to these 5 broadband investment models described here.

We have provided some examples in each of the discussions to kick things off